Manhattan office rents slid during the fourth quarter of 2008, as companies exerted more caution in the wake of the collapse of Lehman Brothers.
Office rents dropped for the first time in 2008 during the last three months of the year by 4.8% to $69.44 (£46.60) said Cushman and Wakefield in a report today.
Kenneth McCarthy, managing director of New York area research at Cushman, said in an interview with Property Week Global, ‘Over the third quarter the difficulties in the financial services sector began to impact on tenants and landlords threw in the towel on asking rents.’
‘Occupiers have begun to pull back and even those companies in the market looking for space stopped to focus on their core businesses. As a result, landlords have been much more willing to cut rents.’
Cushman said that the slowdown has brought available space in the Manhattan office to 31.1m sq ft – a 43% increase from the 22.2m sq ft available at the end of 2007, and the highest level since May 2006.
McCarthy said that the majority of the new space on the market had been contributed by the financial services sector. Bear Stearns, Citibank, Lehman’s and UBS all put office space in the market during 2008 as a result of the credit crisis.
Cushman’s report also said that office leasing activity in Manhattan has slid to its lowest since 2001, with companies signing up for a total of 19.1m sq ft of space last year – which is a 20% drop on the 23.5m sq ft leased during 2007.
McCarthy said, ‘Activity has been driven by those tenants nearing lease expirations who have no choice but to make a decision.’ This trend would continue into 2009, he added.