Gregg Rothkin, executive vice president at CBRE, believes that the commercial real estate market in New York could see a very slow rebound.
Over the past few weeks, CBRE’s 200 Park Avenue office has been seeing an uptick in activity as vaccination rollout makes reentry into society safer.
“There’s more people in the city. More people are walking around,” said Rothki. “We’re starting to see an uptick in tours and we’re starting to see an uptick in proposals, so brokers are getting their tenants out there.”
For Manhattan in particular, there are a few notable things to expect in the coming months from the market.
For instance, leasing velocity remains low. Last year saw the lowest leasing activity in 20 years with just 12.6 million square feet. During the first quarter of 2021, 2.9 million square feet was leased, which was 54% less than the quarterly average. However, he anticipates a slow uptick in velocity as companies become more comfortable with returning to the office.
Additionally, more space is being added onto the market than being taken up by tenants. Rothkin added that there has been around 26 million square feet of negative net absorption in the last 14 months. Availability is also at its highest since 1994 at 17.8%.
This trend has coincided with net effective rents falling.
“The net effective rents have decreased by 23% since the year-end 2019, so that’s to say that free rent and the [tenant improvements] have skyrocketed,” said Rothkin.