The study shows that New York is driven by the nation’s tightest rental market, single-digit commercial vacancies, solid infrastructure and transportation access and record-breaking real estate prices.
“New York is really looked upon as the ultimate 24-hour American city,” said Susan Smith, manager of real estate business advisory services at PricewaterhouseCoopers. “Everybody who has an international presence somewhere wants to have an office in Manhattan.”
The prospects for retail remain strong, and that market is driven increasingly by foreign tourists coming to New York to take advantage of the weak dollar, said Richard Wagman, managing director for Madison Capital. Some retailers report that 60 percent of their sales come from foreign customers, he said. Several foreign luxury brands, including London-based Topshop, are looking to locate flagship stores in the city. Muji, the Japanese department store chain that will open a U.S. flagship at the New York Times Building, opened an outlet in Soho earlier this month and plans more New York stores.
International tourists represented about 17 percent of the total number of visitors to New York City, but accounted for 50 percent of overall spending. In 2006, New York reported a total of 43.8 million visitors, generating $24.7 billion in direct spending.
New York City is expected to receive 7.89 million international visitors in 2007, compared with 7.26 million a year ago, said Chris Heywood, spokesman for NYC & Co. The U.K., Canada and Germany represent the top origination markets for U.S. tourists, while Ireland is one of the fastest growing. Irish visitors spend more money per person, per day than any other nationality.
“They’re literally coming with one suitcase and leaving with two or three,” Heywood said.
During the holiday shopping season, some stores offer a 10 percent discount to shoppers with a foreign passport.
Average commercial asking rents in Manhattan rose 37 percent to a record $62.91 in the third quarter, the biggest year-over-year increase ever, according to Cushman & Wakefield.
The 29th annual report, based on surveys and interviews of more than 600 executives, lenders, brokers, investors and consultants, predicted a correction for the national commercial market in 2008. The correction is not expected to be as severe as this year’s housing market downturn.
While commercial real estate was once driven by regional buyers and lenders, the New York market now acts as a bellwether that “influences investor psychology” and New York-based financial institutions and property owners dominate the national market, the report said.
The residential housing market in Manhattan is as tight as ever, with average sales prices reaching $1,144 per square foot, according to third-quarter data from Miller Samuel. Inventory fell almost 32 percent in the quarter to just 5,204 units.
Available hotel space has significantly tightened, leading to nightly room rates of $325, based on 83 percent occupancy.
Meanwhile the vacancy rate for Manhattan rental apartments was 0.86 percent in the third quarter, according to a report from brokerage Citi Habitats. The average studio rents for $1,958, while three-bedroom apartments averaged $4,868, the report said.
While New York appears to have shaken off any immediate fears of a market downturn, a number of risks remain. Any major round of job cuts in the financial services sector or a steep decrease in bonus money could hurt sales growth in the Manhattan condominium market or depress office rents in 2008, the report stated.
Seattle ranked as the second-best market to watch and the highest-rated metro area for home building. Growth controls and geographic isolation have created dense, mixed-use neighborhoods in a thriving central city, while several corporate headquarters and commercial ties to Asia have sparked a thriving, diverse economy.