The economic uncertainty has had a significant impact on tenants’ expectations
in New York, slowing down the leasing market dramatically compared to
the beginning of the year, Michael Colacino, president of New York City-based Studley,
told GlobeStreet.com in an interview. The stock market and the
leasing market have become more interdependent, he explained. Because
corporations are acting more rapidly, anticipating rather than
responding to activity, there is greater and greater volatility.
“Confusion about the overall economy has resulted in a dramatic
slowdown in the activity going on out there,” he said. “If you look at
the statistics — the vacancy data — we had been decreasing the vacant
space almost from the beginning of the year until the middle of the
summer and now it’s essentially flattened out.”
The European debt crisis and problems with two major French banks
could have a further negative effect on New York City leasing from landlords’ perspective, pushing rents down, he said.
“There’s been no supply and there have been only really two new areas
of potential supply, which is the West Side rail yards area and
Downtown,” he said.”The lack of any fundamental Midtown development
eventually is going to cause a significant increase in rents and the
question is when that’s going to occur. We see it happening in 2013,
2014 or 2015 — a lot of our competitors have said maybe earlier than
The recent deal with Conde Nast was evidence of greater activity in
the entertainment and media area tenants, Colacino pointed out, noting that they
don’t suffer immediately from the problems in Europe. Biotechnology,
software development and Web development are areas that are growing more
quietly. Other tenants, like law firms, have changing preferences,
becoming more similar to banks.
“They need to upgrade 24/7, they’re
looking at issues like redundant power and air conditioning,” he said.
“What [Millennials in the workforce] want is a high speed Internet
connection that allows them to pull up their documents and the library
materials that they need.”
Studley, he said, weathered the storm of the downturn well because
management took steps early in the cycle to avert problems. [GlobeSt]