Manhattan Economic Indicators
Summarizes the last quarter of activity in Manhattan’s real estate market. This report shows historic trends in commercial building sales and available sublease space as an indicator of the leasing market. The report also highlights recent New York City employment figures and how those numbers factor into the national economy.
08-May-2013 — Manhattan Economic Indicators - First Quarter 2013
Commercial Property Market Thrives
There are numerous anecdotal stories confirming how New York’s economy is thriving, yet the commercial real estate statistics were disappointing in the first quarter. Property sales volume fell significantly, but this was expected given the rush at the end of 2012 to close deals before the capital gains tax increased as it did at the 11th hour. The office leasing statistics were flat overall and have been tepid for three straight quarters due largely to a lack of demand from Wall Street and other office-based industries. Yet New York City’s economy grew at a strong, steady pace as indicated by the added 23,900 jobs in the quarter.
As per Chairman and CEO, Peter Hauspurg, “To no one’s surprise, sales volume fell in the first quarter but investor interest has been strong. Because prices are climbing every day, more sellers are bringing properties to the market. While we will not see the same fourth quarter 2012 volume in the next quarter or two, the statistics will start to reflect the high demand we are seeing in the market.”
The enclosed report reviews all of the New York City real estate-related statistics: commercial property sales, employment and office leasing. One of the most compelling findings in the enclosed report is that despite steady growth in the City’s office-based sector, total office occupancy has not changed since the start of the recovery. Moreover, not only did office rents stay flat in the quarter, but a historic look at the data shows that the average Manhattan office rent when adjusted for inflation is nearly the same today as it was 15 years ago. These and other findings are discussed below.
There are numerous anecdotal stories confirming how New York’s economy is thriving, yet the commercial real estate statistics were disappointing in the first quarter. Property sales volume fell significantly, but this was expected given the rush at the end of 2012 to close deals before the capital gains tax increased as it did at the 11th hour. The office leasing statistics were flat overall and have been tepid for three straight quarters due largely to a lack of demand from Wall Street and other office-based industries. Yet New York City’s economy grew at a strong, steady pace as indicated by the added 23,900 jobs in the quarter.
As per Chairman and CEO, Peter Hauspurg, “To no one’s surprise, sales volume fell in the first quarter but investor interest has been strong. Because prices are climbing every day, more sellers are bringing properties to the market. While we will not see the same fourth quarter 2012 volume in the next quarter or two, the statistics will start to reflect the high demand we are seeing in the market.”
The enclosed report reviews all of the New York City real estate-related statistics: commercial property sales, employment and office leasing. One of the most compelling findings in the enclosed report is that despite steady growth in the City’s office-based sector, total office occupancy has not changed since the start of the recovery. Moreover, not only did office rents stay flat in the quarter, but a historic look at the data shows that the average Manhattan office rent when adjusted for inflation is nearly the same today as it was 15 years ago. These and other findings are discussed below.
07-Feb-2013 — Manhattan Economic Indicators - Fourth Quarter 2012
Best Quarter Since 2007
New York City ended the year on a solid note as a flurry of commercial property sales were closed in the final days. By the time the deeds were recorded, more than $13 billion in sales traded hands in Manhattan. The motivation behind the jump in activity came from the imminent change in capital gains taxes that prompted building owners to cash out on their properties before the higher tax rates went into effect.
The biggest impact on the economic statistics has and will continue to be the fiscal changes at the federal level. At the 11th hour, Congress agreed to raise rates on upper income Americans to 39% from 35%. They also agreed to raise capital gains taxes from 15% to 23.8%, including the medicare surcharge. Many have suggested that higher taxes, coupled with uncertainty on the debt ceiling will impede the economy this year. However, there is much to be optimistic about. First, the tax changes will not have a significant impact on most Americans so overall consumption should steadily improve. Secondly, the tax deal is finished so investors and business owners that had put off decisions until a firm deal was done can now move forward. Finally, the European debt crisis has been contained, at least in the short run, so less are worried about Greece or other European countries defaulting on their debt.
New York City ended the year on a solid note as a flurry of commercial property sales were closed in the final days. By the time the deeds were recorded, more than $13 billion in sales traded hands in Manhattan. The motivation behind the jump in activity came from the imminent change in capital gains taxes that prompted building owners to cash out on their properties before the higher tax rates went into effect.
Outside of the commercial real estate market, the economy was plagued by the effects of Hurricane Sandy that destroyed or damaged a lot of properties on the southern fringes of the City and knocked out power in the lower half of Manhattan, which suspended most business activity in the area and dislocated a number of offices, residents and stores. The preliminary employment numbers showed that the City lost 10,200 jobs in the fourth quarter, although many of these lost jobs could be replaced in the next quarter. On a positive note, the construction industry will likely see significant gains from re-building on account of the storm. Finally, the office leasing market was flat in the quarter as few tenants felt any pressure to close deals before the end of the year.
The biggest impact on the economic statistics has and will continue to be the fiscal changes at the federal level. At the 11th hour, Congress agreed to raise rates on upper income Americans to 39% from 35%. They also agreed to raise capital gains taxes from 15% to 23.8%, including the medicare surcharge. Many have suggested that higher taxes, coupled with uncertainty on the debt ceiling will impede the economy this year. However, there is much to be optimistic about. First, the tax changes will not have a significant impact on most Americans so overall consumption should steadily improve. Secondly, the tax deal is finished so investors and business owners that had put off decisions until a firm deal was done can now move forward. Finally, the European debt crisis has been contained, at least in the short run, so less are worried about Greece or other European countries defaulting on their debt.
All of these concerns – the tax deal, debt ceiling and Europe – affect New York City’s economy primarily through Wall Street which has been the most stagnant part of the City’s recovery over the last five years. Wall Street has weathered these past tumultuous years better than most had expected but the outlook for the industry remains bleak as a number of firms continue to announce layoffs. That said, with tourism, private education, media and now construction looking strong, the outlook for New York City remains favorable. As per Chairman and CEO Peter Hauspurg, “We had thought that the market would slow down in January, but it has not. Investors from around the world still regard New York City real estate to be among both the safest bets as a store of value as well as one of the best vehicles for future appreciation.”
12-Nov-2012 — Manhattan Economic Indicators - Third Quarter 2012
New York City’s economy weathered the third quarter quite well considering the lackluster health of the U.S. economy. While the winds of uncertainty from the European debt crisis died down in the quarter, employers around the country did not seem to rush to add to their payrolls as job growth remained stagnant at the national level.
In New York City, however, job growth remained robust. More importantly, the diversity of job growth was broad, although Wall Street lost jobs in the quarter. For decades, the biggest criticism of New York City’s economy was that it was too dependent on Wall Street and needed to diversify away from it. While the finance industry is a significant contributor to the real estate market and the City tax coffers, the evidence from the 2012 statistics shows that New York has indeed diversified away from Wall Street.
Office leasing was flat in the third quarter as well. Office leasing is still hampered by the uncertainty on Wall Street. A number of media reports are still speculating that finance firms will continue to cut jobs and downsize in New York City. These reports may or may not be accurate, but they are sending a message that future availability may go up in the next year. The statistics below show that rents in Lower Manhattan remain extremely low relative to Midtown, Midtown South and even the surrounding metropolitan areas.
Finally, the commercial real estate market held steady but volume declined from the previous two quarters as a number of investors may have held off from making a decision until the presidential election was complete. The early fourth quarter data already shows a jump in activity as owners want to cash out before the capital gains tax goes up.
In New York City, however, job growth remained robust. More importantly, the diversity of job growth was broad, although Wall Street lost jobs in the quarter. For decades, the biggest criticism of New York City’s economy was that it was too dependent on Wall Street and needed to diversify away from it. While the finance industry is a significant contributor to the real estate market and the City tax coffers, the evidence from the 2012 statistics shows that New York has indeed diversified away from Wall Street.
Office leasing was flat in the third quarter as well. Office leasing is still hampered by the uncertainty on Wall Street. A number of media reports are still speculating that finance firms will continue to cut jobs and downsize in New York City. These reports may or may not be accurate, but they are sending a message that future availability may go up in the next year. The statistics below show that rents in Lower Manhattan remain extremely low relative to Midtown, Midtown South and even the surrounding metropolitan areas.
Finally, the commercial real estate market held steady but volume declined from the previous two quarters as a number of investors may have held off from making a decision until the presidential election was complete. The early fourth quarter data already shows a jump in activity as owners want to cash out before the capital gains tax goes up.
While the fourth quarter data will be deeply affected by Hurricane Sandy, it is too early to determine what the impact will be. Retail and other jobs in remote sections of the City will be lost due to the storm, but construction and related jobs will increase in the short term. The commercial real estate market will likely close the year on a positive note as sales activity has started to soar, but leasing will stall especially in Downtown. As per Chairman and CEO Peter Hauspurg, “We are gearing up for a very busy December. Owners are asking us to close in 2012. Retail condominiums sales, in particular, will likely break all previous volume records with what is under contract.” These and all of the indicators listed above are analyzed in detail in the enclosed report.
31-Jul-2012 — Manhattan Economic Indicators - Second Quarter 2012
New York City’s economy once again posted conflicting statistics in the second quarter: job growth was strong but commercial property sales and office leasing were both flat. Echoing the same story told in the first quarter, some industries in New York City -- tourism, technology and retail -- are thriving and should continue to do so, but other office-based industries continue to struggle. This pattern has been steady for the last year, and the big question is will it continue? The answer is likely yes in the short term, until the national economic statistics – employment and retail sales -- start to perk up some more and/or the situation in Europe improves considerably. In the long term, however, New York City is well poised to grow at a robust rate given the optimism generated by CornellNYC Tech and the entrepreneurial spirit brimming throughout the City. Highlights in the enclosed report include the following:
As per Peter Hauspurg, Chairman and CEO, “our buyers remain optimistic about the New York City economy based on the demand for commercial properties of every kind – from multifamily to development sites to office and retail properties. Still, our sellers are reluctant to sell due to their uncertainty about the global market. We are getting deals done, and expect volume to pick up in the next quarter but doubt that things will accelerate until the national job market picks up.”
Manhattan Economic Indicators discusses the current state of the local economy with an in-depth review of a number of statistics.
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- Commercial Property Sales Volume was flat in the second quarter due to a lack of sellers bringing properties to the market; retail property sales volume, however, increased significantly.
- New York City added 19,400 jobs in the second quarter, a pace that once again far exceeded the U.S.
- Office leasing was flat in the second quarter, similar to commercial sales, but the details show that retailers and private education institutions yielded the highest absorption in the quarter.
As per Peter Hauspurg, Chairman and CEO, “our buyers remain optimistic about the New York City economy based on the demand for commercial properties of every kind – from multifamily to development sites to office and retail properties. Still, our sellers are reluctant to sell due to their uncertainty about the global market. We are getting deals done, and expect volume to pick up in the next quarter but doubt that things will accelerate until the national job market picks up.”
Manhattan Economic Indicators discusses the current state of the local economy with an in-depth review of a number of statistics.
11-May-2012 — Manhattan Economic Indicators - First Quarter 2012
New York City’s economy started the year on a spectacular note as the City added more jobs than in any quarter since 2000. Moreover, the Manhattan multifamily property sales market recorded twice the volume that it did in the fourth quarter of 2011. However, the rest of the commercial real estate market was quiet. Owners have been reluctant to put their properties on the market because they do not feel confident that their properties will fetch some of the higher prices seen in 2011 at midyear. This is especially the case for office, hotel and development sites. The apathy in the office market was reinforced by one of the weakest quarters of office leasing in years.
This quarter’s inconsistency between the employment and real estate market statistics actually follows a very consistent pattern. That is, in four of the last five quarters the two sets of statistics have moved in opposite directions. This is indicative of the economic recovery which has moved in fits and starts. That said, we firmly believe that the second quarter statistics will repeat this trend and the statistics will again reverse course: the momentum in commercial sales should accelerate while the pace of job growth will likely slow.
As per Peter Hauspurg, Chairman and CEO, “The market has felt strong as investor interest has not waned in recent months. The problem continues to be a lack of product. Owners are skittish about listing their properties. New York City is well ahead of the curve when it comes to the overall economic recovery. You see it in the jobs numbers and in our investors’ preference for New York City properties.”
01-Jan-2012 — Manhattan Economic Indicators - Fourth Quarter 2011
New York City ended 2011 on a negative note as commercial property sales volume in Manhattan fell 40% while employment declined as well. Office leasing activity was moderate at best. These results were not surprising given the ongoing debt situation in Europe and warnings from Wall Street that fourth quarter earnings would be weak and layoffs were likely. We believe these results look more like a snag in an otherwise upward moving yet slow and bumpy recovery. The analysis herein shows that small and midsize investors are still actively looking for properties, small and midsize companies are actively looking for office space and a number of industries are adding jobs.
Moreover, there is ample anecdotal evidence suggesting that the macro economy is on solid footing. First, the national economy has been growing steadily and across most sectors. Second, the stock market has recovered: the S&P 500 has climbed 20% since its October low and the volatility index dropped 20% in early 2012. Third, while the ongoing news from Europe changes by the week, the European Central Bank and a number of participants are working to resolve the crisis that is still centered on Greece.
The Manhattan Economic Indicators presents the fourth quarter findings and provides a thorough analysis of New York City’s economy.
Moreover, there is ample anecdotal evidence suggesting that the macro economy is on solid footing. First, the national economy has been growing steadily and across most sectors. Second, the stock market has recovered: the S&P 500 has climbed 20% since its October low and the volatility index dropped 20% in early 2012. Third, while the ongoing news from Europe changes by the week, the European Central Bank and a number of participants are working to resolve the crisis that is still centered on Greece.
The Manhattan Economic Indicators presents the fourth quarter findings and provides a thorough analysis of New York City’s economy.
31-Oct-2011 — Manhattan Economic Indicators - Third Quarter 2011
The third quarter statistics offer some reassurances that the city remains on solid footing. The commercial property sales stayed strong, although volume declined slightly from last quarter, and the city recorded positive job growth for the quarter. Still, a look at the details confirms what the media has highlighted: Wall Street continues to face considerable challenges and will likely shed jobs. This will have a negative impact on the office leasing market which has already started to wither under the pressure of a 15% availability rate in Lower Manhattan. National economic statistics have been mixed yet noteworthy pundits forecast that the recovery will stay weak for some time (see conclusion). These reports along with continued threats from the European debt crisis take the wind out of the sails of New York’s economy. Yet job growth from private education, retail and tourism should continue to provide hope that the city will defy the economic uncertainty from afar.
As per Peter Hauspurg, Chairman and CEO, “Investors have maintained their faith in New York’s property market as the commercial sales market continues to withstand the headwinds from the global banking crisis and tepid national economy. Still, we are keeping an eye on Wall Street to see how the announced layoffs might impact financing and the broader economy.”
As per Peter Hauspurg, Chairman and CEO, “Investors have maintained their faith in New York’s property market as the commercial sales market continues to withstand the headwinds from the global banking crisis and tepid national economy. Still, we are keeping an eye on Wall Street to see how the announced layoffs might impact financing and the broader economy.”
09-Aug-2011 — Manhattan Economic Indicators - Second Quarter 2011
In the second quarter, the commercial property sales market recorded its highest quarterly sales volume since 2007, following a dismal first quarter, but the employment picture was mediocre as the city added only 11,300 jobs in the quarter. The office market statistics improved but not significantly, as much of the recent leasing activity shows that firms are moving around but not necessarily taking on more space. All in all, the commercial sales market seems to be leading the rest of the local economy as it struggles to navigate the ongoing uncertainty from the national debt talks and the European banking community.
As per Peter Hauspurg, Chairman and CEO, “We were pleased to see the return of sellers to the market as investor demand for Manhattan properties had far outstripped supply for several years. The current economic climate of a potential U.S. downgrade, the European financial crisis and dismal reports from Wall Street make me wonder how things will progress in the next quarter or two. But what has become even more apparent from this quarter’s results vis-à-vis the rest of the national economy is that Manhattan real estate is still viewed as one of the safest places to invest money.”
As per Peter Hauspurg, Chairman and CEO, “We were pleased to see the return of sellers to the market as investor demand for Manhattan properties had far outstripped supply for several years. The current economic climate of a potential U.S. downgrade, the European financial crisis and dismal reports from Wall Street make me wonder how things will progress in the next quarter or two. But what has become even more apparent from this quarter’s results vis-à-vis the rest of the national economy is that Manhattan real estate is still viewed as one of the safest places to invest money.”
09-May-2011 — Manhattan Economic Indicators - First Quarter 2011
While commercial property sales volume dropped significantly in the first quarter, most of the other economic statistics for New York City showed promise as employment jumped in the quarter and office vacancy rates declined. Still a number of recent announcements from finance firms suggest that Wall Street is not out of the woods yet, and news from the national economy is underwhelming as well. The greatest uncertainty comes from abroad as fallout from Japan’s earthquake has affected global trade and the crisis in the Middle East has sent oil prices through the roof. Nevertheless, the spattering of good news is enough to stay optimistic about the local economy in the near term. As per Peter Hauspurg, Chairman and CEO, “Business slowed in the first quarter after a strong fourth quarter but there is enough in the pipeline to remain hopeful that 2011 will outpace 2010 for the year.”
31-Jan-2011 — Manhattan Economic Indicators - Fourth Quarter 2010
While the numbers were somewhat mixed, 2010 ended on a decidedly solid note as commercial sales volume soared and office availability declined with the removal of sublease space. Employment, however, declined as holiday retail hiring fell short. While most industries are adding jobs, there still remains some uncertainty in the economy as the financial reforms enacted under last year’s Dodd-Frank bill have yet to be fully implemented. Employment in finance is not likely to increase significantly in the coming year, but nearly every other industry in New York City is poised to grow as more and more evidence indicates that the local economy is on the upswing.
As per Peter Hauspurg, Chairman and CEO, “We haven’t seen business activity as we did in the fourth quarter since early 2008. We feel optimistic that 2011 will be a positive year in which sales volume continues to grow as the economy improves.”