By Ken Ashley
ATLANTA (May 17, 2010)
Greg David’s May 16th column in Crain’s New York Business has some good insights as to where the economy is now and the resulting impact on commercial real estate. Parts of his piece are excerpted below. We also offer a link to C&W’s most recent employment report and an excellent analysis of what the positive numbers mean for real estate and its recovery.
Excerpts from Greg David:
- “Reading the economic tea leaves is never an easy task, and it is exceptionally difficult when the economy is shifting gears. Virtually every piece of economic news recently has been better than expected, but economists and commentators downplay its significance because they believe the recession has been so severe that the recovery will be weak and previous levels of employment and economic activity will take years to reach.
- The outlook for commercial real estate in New York is a case in point. Recovery is presumed to be problematic, but two recent developments suggest otherwise.
- First is the news that law firm Proskauer Rose will relocate to 380,000 square feet at now-vacant office building 11 Times Square. It is the biggest new lease since 2008.
- Second is a….report from brokerage Cushman & Wakefield noting that 2.2 million square feet of office space was leased in April, the same figure as in March. The combined total made these the strongest two months since summer 2007.
- …the bearish forecasts on this sector are missing one of the verities of the commercial real estate market: It is exceptionally inelastic. Because the city has not built much new office space in recent decades and because its 11% vacancy rate is the lowest of any major cities, it won’t take much of a rebound to send the vacancy sliding and office rates rising. Once that happens, a new psychology will take hold in which companies commit to office space in the expectation that they will need it as they expand.
- Economic setbacks are possible, and events like the Greek debt crisis show that circumstances beyond anyone’s control could change everything. With that caveat, I think the Proskauer deal and the recent leasing figures show that a commercial office-space rebound is far closer and will be far stronger than anyone expects.”
To summarize, it’s getting better quicker than many pundits thought it would. Go forth and prosper!