Has the NYC office market reached bottom?
It is hard to believe that a person who I had considered one of the pessimists on the state of the office market, Barry Gosin, the president of Newmark Knight Frank, has become the optimist on the New York City office market.
Last Friday, Barry appeared on CNBC, stating that he thinks that office rents have reached bottom.
“We are calling a bottom,” he said. “Our view is that the rents have priced forward, that values have come down significantly, and that sometime this year, prices will start to turn.”
Unfortunately, I would consider myself cautiously optimistic on the state of the office market and have therefore reached out to some other real estate leaders to provide me with their thoughts (read: more realistic) on the state of the market.
Joseph Harbert, the COO of the New York metro region at Cushman & Wakefield, believes “we haven’t reached bottom, but further declines should be minimal — maybe another 5 percent to go.”
Downtown, he said, “expect further rent declines as space comes to market. We have started to see some deals in the $20s [per square foot], although Class A office space is expected to remain above $30 a foot. In Midtown, Class A rents have experienced the greatest decline and are approaching a bottom in the next three to six months. So saying we are close to the bottom would be the most accurate way to put it.”
David Arena, president at Grubb & Ellis New York, also isn’t calling a bottom.
He said that “two factors are conspiring to keep rents steady at today’s rates”: the economy and unemployment, and their slow turnaround will prevent the real estate market from following suit anytime soon.
On a positive note (and for which I concur), he sees that in 2010 [there will be] “better assets in stabilized neighborhoods [and] rents will remain steady to slightly positive. [Today,] lesser markets remain murky and struggle to find a bottom. Opportunities abound for intelligent tenants. Act cautiously but [tenants need] to move swiftly once they have made up their minds.”
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 on WEGTV in East Hampton. His radio show, “The Michael Stoler Real Estate Report,” airs on 1010 WINS on Saturdays and Sundays. Stoler is a director at Madison Realty Capital as well as an adjunct professor at NYU Real Estate Institute, and a former contributing editor and columnist for the New York Sun.