“How do you think we fared last year financially?” Cushman & Wakefield New York Metro COO Joseph Harbert asked the brokers and executives assembled Wednesday morning for breakfast in the back room of Michael’s. “Up or down?”
The room was silent.
“Come on—some participation!” Mr. Harbert said.
Ken McCarthy, Cushman’s managing director of research, who had just lectured on the state of the economy, gave everyone a hint: He pointed to the floor.
The theme of the “Market Analysis and Outlook” breakfast was, essentially, Look How Much Better We’re Doing and Look How Bright the Future Is. Cushman executives summoned data to support their optimism. Wherever the data was less rosy, they made sure to say that the Manhattan office market had hit bottom. That things are getting better. That, as a Cushman research pamphlet says, we are “turning a corner.”
Mr. Harbert recalled the first quarter of 2009 with a shudder. “I think all of us remember the press breakfast that quarter was not a happy one,” he said.
At Wednesday’s event, which presented the second quarter numbers (which actually reflect the market reality of weeks and even months ago), Cushman executives talked like people who have glimpsed an oasis at the end of a long desert. What seemed to be the favorite statistic was that current office leases have totaled 12.6 million square feet so far in 2010, a 97.5 percent increase from last year.
Midtown and midtown south appear to be leading the way toward a stronger office market. The square footage leased in midtown proper is up 102.4 percent from last year, and midtown south is up 236.1 percent. Mr. Harbert said that midtown south, once an “alternate market” for offices, is now a “destination.” Mr. McCarthy, the economist, said that midtown, which was hit hardest in the recession, is bouncing back most quickly.
But the picture is bleaker downtown, where leased square footage is only up 14.3 percent. Vacancy downtown is at 9.9 percent, up from 8.7 percent in the same quarter last year. Asking rents are low, at an average of $37.81 a square foot, a 13.7 percent drop from last year. In midtown the vacancy is, worryingly, higher, at 11.5 percent, but still, that number represents a slight decrease from last year. Midtown rents are up to a relatively strong $61.66. Mr. Harbert said the downtown situation “could get a bit worse” before it gets better.
High-profile deals in the last two quarters may be cause for hope, but Mr. Harbert was cautious: Midrange properties, the commercial market’s “bread and butter,” only comprise 15 percent of deals.
Breakfast on Wednesday was standard: scrambled eggs, bacon, pancakes and fruit. Mr. McCarthy said he’s eaten that exact meal every quarter “for as long as I’ve been here.” Good times or bad, the food remains the same.
Once the speech wrapped up, Cushman employees passed around a microphone, each contributing a nugget of optimism. Mr. McCarthy, among the most optimistic, finally admitted that rents, at least, haven’t yet bottomed out. “It’s probably going to be 2011 before we see rents tick up again across the board,” he said.