Bleak office market means cheap rents through 2009

New York /
Nov.November 25, 2008 12:44 PM

 
Can you imagine renting in A Class A Office Building On Park Avenue And Not On Park Avenue South — for $60 to $70 per square foot? 

That’s what real estate industry experts believe rents could drop to in 2009, based upon the rising unemployment, implosion of Wall Street and the financial services industry, and substantial increase in sublease space.

“Rents are coming down,” said Steven Witkoff, CEO of the Witkoff Group, at my class at the NYU Real Estate Institute. “There is stress all over the market. Many tenants are 60 days behind in paying their rents.”

Rents today in The Best Buildings On Park Avenue can be as high as $150 per square foot.

Joshua Zamir, the managing principal at Capstone Equities, the owner and operator of 14 Wall Street and 156 William Street, said, “It is going to be a very tough next few years and values of properties are going to be hit very hard.”

In a Newmark Knight Frank report released last month, the company says that the average rent in 2009 will be at least 10 percent lower than the average level in 2008.

Newmark CEO Barry Gosin said many people are living in a dark tunnel and everything they are doing now is driven by emotion. Under those conditions, he noted, few people are interested in leasing space unless they have no other option.

Landlords who were once in denial of the credit crisis are now making deals.

In addition to offering lower rental rates, more and more landlords are hoping to entice renters by offering incentives.

Nearly every building in the city, perhaps with the exception of 9 West 57th Street and the General Motors Building, is offering incentives to tenants. They include additional periods of free rent and higher tenant improvement allowances.

The stars are aligned for a bleak office leasing market for at least the next 12 months, which will provide great opportunities to tenants seeking a good deal on commercial space.

Michael Stoler is a columnist for The Real Deal and host of real estate programs “The Stoler Report” and “Building New York”  on CUNY TV and WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is also an adjunct professor at NYU Real Estate Institute and a former columnist for the New York Sun.


Related Articles

arrow_forward_ios
(Image by Wolfgang & Hite via Dezeen)

Hudson Yards megadevelopment inspires a new line of sex toys

Hudson Yards megadevelopment inspires a new line of sex toys
Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio
Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out
Joe Sitt and Charles Scribner’s Sons Building in Midtown (Thor, Google Maps)

Thor’s $150M loan on 597 Fifth heads to special servicing

Thor’s $150M loan on 597 Fifth heads to special servicing
258 8th Avenue (Google, Target)

Target planning yet another NYC store in Chelsea

Target planning yet another NYC store in Chelsea
Steve Witkoff and 4766 North Bay Road (Getty, Douglas Elliman)

Steve Witkoff buys waterfront Miami Beach lot for $8M

Steve Witkoff buys waterfront Miami Beach lot for $8M
Churchill Real Estate's Justin Ehrlich and 381 Broadway (Google Maps)

Two-year Tribeca foreclosure saga continues with lawsuit over $20M

Two-year Tribeca foreclosure saga continues with lawsuit over $20M
Compass CEO Robert Reffkin (Getty; iStock)

Compass eyes IPO in 2021

Compass eyes IPO in 2021
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...