Office landlords are going to have a harder time pushing rents as new supply comes online and job growth slows, especially in East Coast cities like New York, a new report claims.
Real estate research firm Green Street Advisors [TRDataCustom] revised its projections for rent increases nationwide through 2020 from 4 percent annually down to roughly 3 percent annually, the Wall Street Journal reported.
Green Street also said that increases in 2016 were smaller than expected.
“We see no reason why the office markets are going to start delivering rent growth at a more meaningful pace,” Green Street analyst Jed Reagan told the newspaper. “If anything, we think as the decade wears on, job growth is likely to slow down a little bit and supply growth is expected to pick up a bit.”
The research firm said cities like New York, Boston and Washington are experiencing the biggest slowdowns. In New York, the city added 21,700 office jobs last year, compared to 44,900 in 2015, according to the Office of Management and Budget. The agency is forecasting job growth of 1.3 percent this year and .9 percent in 2018.
Nationwide, new office supply was 1.2 percent of the country’s total office space last year, compared to .3 percent in 2012, according to Green Street. Through 2021, it’s expected to equal 7.6 percent of total space.
Not all landlords said they were feeling the pinch, though.
SL Green Realty CEO Marc Holliday said the slower job gains are coming off of “blistering” levels, and the market continues to be “robust.”
He said the company’s portfolio is 97 percent occupied, and average renewals are getting inked at rents 20 percent higher than expiring rents.
“It can’t really get much better,” he said. [WSJ] – Rich Bockmann