Economic growth is starting to spur demand for office space
(Bloomberg) -- Commercial real estate rents are poised to rise in 2011 after reaching a low this year, according to Bruce Mosler, co-chairman of Cushman & Wakefield Inc., the largest closely held property services company.
"The market has bottomed," Mosler said today at the Real Estate Briefing hosted by Bloomberg Link in New York. "We can expect to see rental appreciation next year."
U.S. economic growth is beginning to stimulate demand for office space, Daniel Neidich, chief executive officer of New York-based Dune Real Estate Partners, said during a panel discussion that also featured Howard Michaels, chairman of the Carlton Group Ltd. Manhattan office leasing by square footage increased 66 percent in the first nine months from a year earlier, though rents have fallen for eight straight quarters, New York-based Cushman & Wakefield reported last month.
"Real estate market fundamentals are improving," Neidich said.
The U.S. economy expanded at a 2 percent rate in the three months ended in September, the fifth consecutive quarterly increase. The growth followed 12 months of contraction as the economy weathered the worst financial crisis since the Great Depression.
805 Third Ave.
Office vacancies in U.S. central business districts declined for the second straight time in the third quarter as tenants signed leases for additional space, according to Cushman & Wakefield. The average vacancy rate fell to 14.7 percent from 14.8 percent in the second quarter, the broker said Oct. 14.
Vacancies dropped in half of the 30 cities tracked by Cushman.
"About a year ago we were going one mile an hour,"
Charles S. Cohen, chief executive of Cohen Brothers Realty Corp.
in New York, said during a separate panel discussion. "Six months ago we were going five miles an hour. Maybe we're going about 15 to 20 miles an hour now."
Cohen said today that his New York-based firm signed a lease with Meredith Corp. for nine floors comprising 212,594 square feet of space for its new corporate headquarters at 805 Third Ave. in Manhattan. He declined to disclose terms.
Meredith, the publisher whose magazines include Better Homes and Gardens, plans to consolidate its 125 Park Ave. and 375 Lexington Ave. offices in the new space.
New York, Washington
The New York and Washington markets are in most demand from real estate investors, said Jonathan L. Mechanic, a partner at Fried, Frank, Harris, Shriver & Jacobson LLP in New York.
"Capital feels safest investing in New York and D.C.," he said.
Mechanic doesn't expect the changes in Congress from the election will have big impact on vacancies in Washington.
"I don't think people are concerned that the Washington market is going to fall off a cliff because the Republicans have come back."
Dune's Neidich said there is a lot of pressure on landlords to keep rents down even though the number of deals has increased.
"It's clearly a little bit of a race to the bottom," he said.