Manhattan 2011 Office Rents May Rise 10% on Economic Growth, Colliers Says
Manhattan office rents may rise as much as 10 percent next year as global growth accelerates, the chief economist of Colliers International’s New York regional office said.
“Cash balances and corporate liquidity are almost at an all-time high,” Peter Kozel said today at a press briefing in Manhattan. “That’s enormous potential energy just waiting to be released. And New York City is enormously tied into the global economy.”
Kozel and other executives from Colliers, a Seattle-based property broker, said office availability will decline and rents will rise as New York rebounds from the credit crisis that began in 2008. With emerging markets growing, foreign firms are increasingly looking at New York as a base from which to boost their U.S. market share, Kozel said.
Rents sought by landlords in midtown Manhattan are projected to average $60.56 a square foot this quarter, up 1 percent from the previous three months and 2.1 percent from a year earlier. That would be the highest since mid-2009, Colliers reported. Office availability probably will be 12.5 percent, down from 14.9 percent at the end of last year.
Colliers New York Chairman Robert Freedman said that, for the first time since the credit meltdown, he is telling potential tenants, “Do not miss this market.”
Most economists expect 2011 to be a continuation of this year, with U.S. unemployment staying above 9 percent, labor rolls rising about 1 percent and interest rates on 10-year Treasury bills remaining at less than 3 percent, Kozel said.
Corporate Investment
Economists predict U.S. gross domestic product will expand 2.5 percent next year after 2.7 percent this year, according to the median of 63 estimates compiled by Bloomberg. The jobless rate is likely to fall to 9.3 percent.
Corporate investment probably will rise, possibly fueled by the cut in Social Security withholdings included in President Barack Obama’s tax compromise with congressional Republicans, Kozel said.
Increases in mergers, acquisitions, and initial and secondary stock offerings probably will boost hiring in New York’s financial industry, spurring demand for office space. Law, accounting and other business-service firms would grow as well, according to Colliers’ projections. New York employment is likely to rise 2 percent to 2.5 percent, resulting in office availability dropping about 2 percentage points, Kozel said.
SL Green
Colliers’ forecast is consistent with an analysis offered on Dec. 6 by SL Green Realty Corp., New York’s biggest office landlord, during its annual investor day.
SL Green Chief Executive Officer Marc Holliday said he expects between 10,000 and 20,000 office-using jobs to be created next year in New York City.
With the only significant additions to Manhattan’s 400 million-square-foot (37 million-square-meter) office inventory coming from the 4.4 million square feet under construction at the World Trade Center site, “the opportunity for growth is much more substantial,” Holliday said.
To contact the reporter on this story: David M. Levitt in New York at dlevitt@bloomberg.net
To contact the editor responsible for this story: Kara Wetzel in New York at kwetzel@bloomberg.net
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