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.