Special Report: Implications of National and New York City Business Trends on the Demand for New York City Office Space
Peter P. Kozel, Ph.D
Executive Managing Director - Research & RE Strategies
Newmark Knight Frank

Whether there are two consecutive quarters of negative growth (the official definition of a recession) is really not important for the performance of the local and regional property markets. Large and important sectors of the economy are experiencing declines in operations, and this is particularly true for the financial sector in New York City. This report attempts to quantify the implications of the reversals in this key industry and others on the outlook for the New York City office market.

Based on a likely scenario for the New York City economy, the office vacancy rate will increase from the current 5% level to around the 8% by the second half of 2009. Asking rent levels have already stopped growing, and effective rents are coming down as concessions and allowances increase. The jump in vacancy, however, will be large enough to bring even asking rents down over the next year.