December 2020
The pandemic continues to devastate the New York City commercial real estate market. Leasing activity dropped to 4.7 million square feet in the third quarter of 2020, a 44.9% decline over the same quarter in 2019 according to market sources. Market availability stood at 13.3%, the highest level since 2010. Asking prices declined 3.3% and taking prices were approximately 10.0% percent below these reduced asking prices.
Armano Real Estate estimates that only 10% of workers are reporting back to the office. Occupiers continue to flood the market with sublet space which now accounts for 26.7% of all availability according to market sources.
Hope, however, abounds as New Yorkers are receiving the first doses of the Pfizer vaccine which has recently received FDA approval for emergency use. Moderna is also expected to receive emergency use authorization shortly.
Armano expects that absorption rates will substantially increase in the third and fourth quarter of 2021. Thus, demand and supply forces should come back into balance in the second half of next year. However, Armano expects that this recovery will be dampened as there is likely to be a 10-15% or more decrease in structural demand for office space resulting from the continuity of work from home trends.
The result of current supply and demand imbalance is a big gap between landlord asking prices and tenant expected taking prices. Landlords point to the vaccines and a substantial second half of 2021 recovery as rational for higher than expected taking prices. Tenants point to empty buildings, increases in availability of space and lower than expected future space demand as rational for large rent decreases. Armano expects that this large spread will decrease in the coming months as market uncertainty decreases and market forces return to equilibrium.
The recent market weakness presents an excellent opportunity for certain tenants to leverage their real estate position for future success. Accordingly, Armano Real Estate is modifying leases for tenants and implementing space planning and design strategies to reflect new workplace and economic realities. We have been achieving occupancy cost savings in the 18% to over 80% range, depending on the case and type of strategy.
Safely re-occupying office space and re-positioning real estate based on future workplace trends and business prospects is of utmost concern to employers. Thus, we are providing financial lease analyses and preliminary space programs for tenants at no-fee. This allows tenants to gain a better understanding of their current situation and to help formulate the best possible corporate real estate strategy and vision in a changing market.
Please feel free to contact us regarding your future space plan and vision. We will help you evaluate all options and make the best possible corporate real estate decision.
| Wishing you all a Merry Christmas, Happy Hanukkah and happy, healthy and prosperous New Year. |
Please see the below links for NYS Guidelines: NYS GuidelinesReopening New York Please see the below links for NYC recovery index: NYC Economic Recovery Index Please see the below links for NYC COVID results: Positive COVID-19 Results by Region Please see the following link regarding HealthCheck360 COVID-19 Workplace Solutions: HealthCheck360 COVID-19 Workplace Solutions |
