Bargain commercial property rents in New York for those prepared to haggle
Bargain commercial property rental prices are making even expensive parts of New York City more attractive and further decreases are expected in 2009.
They key is the word 'negotiable' which means that intrepid firms can haggle down property rents even further, according to analysts who also admit that they have been astonished by the steep price declines and the rate at which they have fallen.
'Prices have fallen faster than any time in the last 20 years. There has been more damage to real estate values in the last four months than in any other four month period,' said Mitchell Steir of brokerage firm Studley.
Figures show that asking rents in Manhattan over all declined 4.4% from the third quarter to the fourth quarter, with the decrease in Midtown even more pronounced at 8.3%, the steepest since 2001.
But brokers say that actual rents have fallen much further than the data suggests. A study from Studley shows that the asking rents for 40% of the spaces included in its research are listed as 'negotiable.'
There can be little doubt that hard bargains are being sought. Concessions, rent free periods, help in renovating and other factors don't show on the actual rental figures. Also it is difficult to know what rents are currently because there has been so little activity in the past three months.
Brokers say they are still busy showing space but are having a much tougher time persuading tenants to close deals. Only 5.4 million square feet of space were leased in the last quarter, well below the quarterly average of 7.2 million square feet in the last nine years, Studley reported.
'The market is frozen. They don't have the money, and they can't borrow the money. The velocity has slowed to a virtual standstill,' said Richard Warshauer, a senior managing director at Williams Real Estate.
There is also a decline in office refurbishment. It used to be the norm for a new tenant to rip out the predecessor's décor, no matter how suitable it was. But now the emphasis is on trying to avoid wasting money.
'First and foremost, tenants are interested in capital preservation,' said Mary Ann Tighe, the regional chief executive of CB Richard Ellis.
Brokers predict that office space will flood the market in 2009 further depressing rents. At the same time landlords will do all they can to make the space attractive including offering more short term leases. Some landlords are offering up to a year's free rent to tenants who are willing to make a longer commitment.
