While leasing activity for much of New York City in the past few months has been more lackluster than blockbuster, a sizable chunk of available space –sizable in the, say, 6 million square foot range– is on the cusp of hitting the market, The Wall Street Journal reports.
New developments like 1 World Trade Center, 4 World Trade Center, and Edward Minskoff’s 51 Astor Place, are all slated to hit the market in 2013. The last time NYC had this much new space becoming available was in 1989, said Cassidy Turley’s Robert Sammons.
But this isn’t giving developers like Mr. Minskoff a roaring case of agita and insomnia.
“I sleep well at night,” Mr. Minskoff told The WSJ .
As WSJ (and Commercial Observer alumni Laura Kusisto) points out:
“… the bulge in the delivery pipeline comes at a time when demand in the New York office market is showing signs of flagging because of the contraction in the financial-services industry. Tenants with more than 5,000 square feet leased 5.9 million square feet in the fourth quarter, compared with 6 million square feet in the third quarter and 6.2 million square feet in the fourth quarter of 2010, according to Colliers International.
Also, financial-services firms are likely to pull back from more than 2 million square feet of space requirements in the next couple of years. That’s going to put pressure on owners to possibly cut rents to fill space in their towers.”
In short, there’s going to be a whole lotta inventory, but not too many takers, some fear. Unveiling new space at a painful time in the market, much like the struggling 11 Times Square building (which was built during the downturn and is now roughly 60 percent vacant), can spell restless nights for owners, Ms. Kusisto reports.
“Manhattan development tends to run in cycles. There was an enormous surge of new construction in the late 1980s as developers scrambled to take advantage of expiring tax breaks.
The result: Many speculative buildings hit the market just as the national economy went into the recession of the early 1990s. Many of the developers wound up losing their buildings to banks and some of the projects sat empty for years.”
Other possible concerns are tenants who are becoming more hip to smaller and more efficient office spaces. When the leases for these tenants come up, they are taking less, not more, space.
And if firms flock for the newer buildings, it will come at the expense of older ones.
“‘What you end up with is a segmented marketplace, where certain buildings are going to lease and other buildings might just languish with empty space,’” says Paul Glickman, of Jones Lang LaSalle, who is on the team leasing 51 Astor.”
But such concerns are not keeping Mr. Minskoff and World Trade Center developer Larry Silverstein up at night… at least, not in 2012.