2010 Global Market Report - NAI Commercial Real Estate

New York City, New YorkLong Island, New YorkContactNAI Global New York City+1 212 405 2500Metropolitan AreaEconomic Overview2008Population2013 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age18,962,01919,340,1769,120,649$89,679$62,06538The Manhattan office market was relatively stable at the endof 2009. The 11.9% vacancy reached in Q3 2009 was thehighest Manhattan has seen in four years, but is still amongthe lowest in the country. Rents continued to decline in 2009with average asking rents falling to $52.05/SF, down fromalmost $70.00/SF in late 2008. However, the rate of declinehas stabilized. Sublease space, which had increased eachquarter for over a year, has also stabilized. Most of the recentleasing activity has been led by those companies waiting forrents to hit bottom and finally deciding to make a move toupgrade their existing space at rock bottom prices.Midtown Manhattan enjoys a great diversity of tenants, andthere are several large tenants seeking space in the200,000+ SF range. Tenants with good credit will continueto have the upper hand with landlords offering increasedconcessions. The Midtown South submarket provides secondaryoffice buildings for tenants seeking less expensivealternatives. Downtown Manhattan is bracing for an increasein available space; however, city government is expandingincentives for services companies locating to the area.Manhattan market fundamentals remain weak with currentunemployment at 10.3%, the highest in New York City in 16years. The financial industry continues to reduce its laborforce, job growth and corporate revenues remain stagnantand the credit market remains tight. With the fundamentalsshowing continued weakness, a turnaround in the commercialmarket is not expected until mid to late 2010.Investment sales in Manhattan have been few; howeverdistressed assets are starting to appear in greater numberand it is expected that foreign investors and well capitalizedinvestment groups will seek to take advantage of a newpricing structure, spurring the expected turnaround. Thestabilization of sublet space is another indication that themarket may soon turn around as it indicates firms are holdingonto space for anticipated staffing needs, rather than puttingit on the market at a loss and then having to lease additionalspace at a premium once the market has recovered.There are many positive signs, including a strong workforce,New York City’s global leadership and its diverse industriessuch as: Professional Services, Bioscience, Emerging Technology,Green Industry, Media & Entertainment, Not ForProfit, Fashion and Tourism.ContactNAI Long Island+1 631 270 3000Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age1,267,44411,173,752630,791$119,517$91,44542.1As with most of the country, Long Island is feeling the effectsof the recession. History has shown the local economy tobe stable compared to the rest of the nation, in good timesand bad, as evidenced by the current unemployment rateof 7.4%, well below the national average. However, allsegments of the real estate market are soft and it isexpected to worsen before it improves.The office market has weakened considerably throughout2009. Overall vacancy rates for Class A and B space haveincreased to 11.1%. However, the total availability rate,which accounts for occupied sublet space, has increasedto 17.5%. Landlords are offering substantial rent reductionsand concessions to attract and retain tenants.The investment market has changed rapidly in 2009. Thelack of credit has caused investment sales to come to avirtual standstill with few deals being completed. Many propertiespurchased at top prices in recent years are strugglingto meet debt service. Attention has turned to lenders whoare holding numerous loans in early stages of default.The industrial sector is also very soft. Vacancy rates haverisen to 9% but numerous owner occupants have beenstruggling to sell properties too large for their businessesas sales prices have fallen 20-30% in most submarkets.The retail market has been impacted substantially by therecession. Many auto dealerships have lost their licenses,putting quality properties on the market. That increasedinventory has led to a significant reduction of prices forpotential development sites. Home Depot Expo and CircuitCity have left the market, leaving several big box vacancies.Most of these spaces have not been filled but they arebeing considered by retailers looking to take advantage ofthe opportunities.Unlike the recession of the early 1990s, Long Island is notoverbuilt. Because of this, prevailing sentiment is that therecovery from this downturn may be faster than the recoveryin the mid 90s.New York City At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyMIDTOWN OFFICENew Construction (AAA)$ 110.00 $ 185.00 $ 150.00 N/AClass A (Prime)$ 80.00 $ 225.00 $ 100.00 7.2%Class B (Secondary)DOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAIL (Midtown)$$$$38.0065.0040.0025.00N/AN/AN/A$$$$65.0075.0065.0045.00N/AN/AN/A$$$$52.0070.0052.5035.00N/AN/AN/A6.5%N/A6.4%8.2%N/AN/AN/ACentral Business DistrictNeighborhood Service CentersCommunity Power CenterRegional Malls$ 60.00N/AN/AN/A$1,400.00N/AN/AN/A$ 300.00N/AN/AN/A3.5%N/AN/AN/ADEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidentialN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/ALong Island At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power Center$$$$$$$N/AN/AN/A30.0028.0022.004.50N/A14.00N/A18.0020.00$$$$$$$N/AN/AN/A36.0034.0028.007.00N/A18.00N/A30.0040.00N/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/A11.0%11.0%11.0%9.0%9.0%8.5%N/AN/AN/ARegional Malls$ 60.00 $ 120.00 N/A N/ADEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office Parks$N/A500,000.00N/A$ 1,000,000.00Land in Industrial Parks$ 300,000.00 $ 600,000.00Office/Industrial Land - Non-parkRetail/Commercial LandResidential$$500,000.00800,000.00N/A$ 1,000,000.00$ 2,500,000.00N/A2010 Global Market Report ■ www.naiglobal.com 110