The Manhattan office market, according to a new report, hasn’t looked this bleak since Barack Obama was a community organizer with designs.
Both the overall Manhattan commercial vacancy rate and the vacancy rate for top-shelf, Class A properties in midtown are the highest since 1996, according to Colliers ABR’s May market report (PDF). Overall vacancy rose to 13.1 percent last month, the highest since December 1996. And the Class A midtown vacancy rate rose to a “rather shocking” 13.7 percent, according to the report, only two-tenths of a percentage lower than the 13.9 percent seen in February 1996.
Over the last four months, Class A vacancies in midtown have risen about a percentage point a month, from 11.3 percent in February to 12.2 percent in March to 13 percent in April, according to Colliers ABR.
March’s Colliers ABR market report noted that comparisons with the recession of 200—when Manhattan commercial vacancy rates reached 11.3 percent—were no longer sufficient. The current vacancy rates are most closely matched by data from 1996.
Of course, the current vacancy rates are still a long way from breaking longer-term records. In January 1992, “the recession combined with new construction” drove overall Manhattan vacancy rates up to 17.9 percent, according to Robert Sammons, director of research for Colliers ABR. That’s the highest rate since Colliers started collecting and publishing commercial real estate data in December 1991.
“The problem then was that New York had overbuilt, especially midtown,” Mr. Sammons said Monday. Today, Mr. Sammons said, “Thankfully, we don’t have so much new construction.”
Still, the commercial market remains grim, especially at the higher end. The average asking rent per square foot for midtown Class A in May was down 30 percent annually, to $69.23. Total leasing activity in Manhattan was also down by 30 percent.
Mr. Sammons said May’s statistics did leave some room for optimism. “We do see the leasing market opening up a bit,” he said. “There are tenants finally closing deals after sitting on the sidelines for a time.”
While a full recovery is still a long way off, Mr. Sammons said, “maybe we’re at the beginning of the end.”