A Forward Look at the 2015 Office Leasing Market
Guest Blog: Ben Blumenthal is an NYC-based commercial real estate broker representing clients looking to lease and sell property.
Last Month's Post: A Little CRE Advice As the Year Ends
It has been well noted and quite apparent for those in the market that NYC office rents have made tremendous gains over the last 24 months, with asking rents up 5-10% over the last 12 months alone. While talk of this trend usually proceeds some sort of murmur about a “market bubble”, one metric that is worth considering when judging the health and stability of the market, is the movement of “net-effective rents”.
The “net effective rent” represents the amount of the base rent less any landlord concessions (i.e. free rent, tenant improvement allowance, build-out etc.). While in softer markets the spread between asking rents and net effective rents is greater, net effective rents in Manhattan have spiked 15% year over year and over 30% since 2012 as landlord concessions continue to tighten. This metric has closed the spread dramatically between asking and net effective rents and points to an overall market that is definitely strong but more importantly, stable.
It is anyone’s guess how the millions of feet of Midtown commercial space coming online will affect the market and how macro-economic factors will hold up but for now it looks like pricing tomorrow will be stronger than today’s.
By: Benjamin Blumenthal
Associate Director of Leasing | Norman Bobrow & Co. Inc.