Tenants are seeking shorter lease terms and extracting more concessions in Manhattan office deals, according to Cushman & Wakefield executives speaking at a quarterly breakfast today.
Joseph Harbert, COO for Cushman & Wakefield’s New York metro region, said tenants were seeking less lengthy lease terms.
“We are seeing redirection to shorter deals,” such as four- or five-year sublets instead of 10-year leases, he said.
A Cushman executive vice president, Jonathan Serko, said the amounts tenants are extracting from landlords for a construction allowance to build out space has risen to about $50 per square foot or more, up from $35 to $45 per foot over the past year.
In a typical market, landlords give about $35 to $40 per foot for an allowance, several brokers not affiliated with Cushman said.
“We are seeing in deals where the space has to be built, the [construction allowance] increase,” as landlords try and make their raw space more attractive, Serko said in an interview after the meeting.
Overall, leasing activity was at a five-year low, he said. Square feet leased was down 14.4 percent from the same period a year ago, and the 15.7 million square feet recorded through the quarter was the lowest number since 2003.
Cushman & Wakefield reported a 7.4 percent vacancy rate in the third quarter, but Harbert said he expected that to rise to as high as 10 percent in the fourth quarter.
“I see the top of the market as August 2008,” he said.