Queens office market sees sharp rent drops

TRD New York /
Jan.January 30, 2009 05:12 PM

The weak office market in Manhattan is beginning to spill into Queens, where asking rents have been falling by as much as 25 percent since last summer, and are expected to drop further, borough brokers said.

Landlords in some buildings have cut prices to attract new tenants, but vacancy rates remain relatively low in the borough compared to Manhattan because firms have not emptied office space at the same rate, said Ira Sherman senior director and broker at commercial real estate firm Greiner-Maltz.

“It will begin to show itself in the next two or three months. I have the feeling the sublease market will pick up very strongly, and the question is, who is going to take it,” Sherman said.

The Queens office market is concentrated in neighborhoods including Long Island City, Forest Hills, Jamaica and Flushing.

Comprehensive information for the borough is hard to come by, brokers said, because of the piecemeal nature of how it is collected. Most firms rely on their own data.

Grubb & Ellis reported this month that in the approximately 14 million square feet of office space in Queens, vacancy rates remained low and asking rents stable in the fourth quarter compared to prior year quarters. Vacancy rates fell from 9.2 percent in 2003 to 5 percent in 2007, before rising again last year, still below 2003 levels, to 6.4 percent. Asking rents rose from $28.69 in 2003 to $31.56 in 2007, before falling last year to $31.14, the firm reported.

In Manhattan, the vacancy rate was 7.6 percent in December 2008, with an average asking rent of $67.20, according to CB Richard Ellis.

Daniel Woods, an associate with Grubb & Ellis, said net effective rents have fallen by 10 percent to 12 percent from June last year to this month, taking into consideration free rent, tenant improvements and concessions.

He would not make a prediction for the future, but said, “If Manhattan is going down then it is just going to follow suit.”

In Whitestone, Queens, asking rents at the Class A, 57,000-square-foot office building at 30-56 Whitestone Expressway were recently slashed from about $28 per square foot to the low to mid $20’s, said Richard Seiler, COO for the property’s owner Triangle Equities. The building is approximately 80 percent leased, and the firm recently signed a deal for about $24 per foot.

He said like all landlords the company was “anxious to make deals. We don’t have much vacancy, but any vacancy we have we would like to see leased,” he said.

Ashish Dua, a principal at Acumen Capital Partners, said his firm cut asking rents by 20 percent to about $20 per foot to attract tenants to its 300,000-square-foot rehabilitated warehouse building in Long Island City at 37-18 Northern Boulevard.

He said potential tenants were taking longer to sign leases, but deep city tax incentives were attracting tenants from Manhattan.

The city’s Relocation and Employment Assistance program reduces costs by as much as $9 per square foot, Dua said, to companies that move office employees to non-traditional office markets in outer boroughs like Queens, or above 96th Street in Manhattan.

Commenting on the tax breaks, Greiner-Maltz’s Sherman said, “Firms that can live outside of Manhattan stand to gain.”

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