The future of the Manhattan office market–and, for that matter, the Manhattan economy–could be divined by looking at the borough’s Class B and C office space.
A new report shows an increase since early last year in the vacancy rates for Manhattan’s lesser (read: cheaper) office space, though the reasons for the vacancies aren’t entirely clear. The Class B vacancy rate increased from 9.3 percent in March 2007 to 10.4 percent in March 2008, according to brokerage Colliers ABR. The Class C vacancy rate increased during the same period from 5.4 percent to 9.1 percent.
In Midtown South, the area with most of the borough’s cheaper office space, the Class B vacancy rate increased from 8.7 percent in March 2007 to 10.4 percent in March 2008; and the Class C vacancy rate nearly doubled annually, to 12.1 percent in March.
At the same time, the vacancy rate for top-flight Class A space remained fairly steady the last 12 months or so. In Midtown, where Class A space clusters in the island’s best skyscrapers, the vacancy rate was 6.1 percent in March of last year and 6.2 percent this past March.
The two main expenses for companies, whether large or small, are typically people and real estate. If the companies that can afford only the Class B and C office space are shedding real estate, what’s that say about the economy overall? And it’s also important to remember recent history: The last time Class B and C vacancy rates rose significantly (and stayed high) was after the dot-com bust of 1999 and 2000, as tech firms scattered throughout Midtown South and Downtown fled space they could no longer fill nor afford.
Are we nearing a repeat?
