NEW YORK CITY—The annual joint meeting of the Industrial and OfficeAssociation of the New York Metropolitan Area (IOREBA) and the New York and New Jersey Chapters of the Society of Industrial and Office Realtors (SIOR) at the New York Athletic Club had over 100 people in attendance, according to David A. Simon, president of IOREBA and Cassidy Turley managing principal of New Jersey.
Conceding that the overall business, real estate, and the exporting climate is “disappointing,” SIOR national president Geoffrey Kreusser called 2011 “Groundhog Day,” a reference to the Bill Murray movie in which he wakes up to the same day over and over again.
“The year began with unemployment at 9.4 percent,” noted Kreusser, principal at Colliersin Denver. “2010 had set a record for foreclosures. We watched a Congress unable to address our debt crisis. Crisis after crisis eroded confidence,” he said, citing the earthquake and its after-effects in Japan and uncertainty surrounding the euro. “We saw just 26 of this country’s 100 largest cities have job gains in all of the last four quarters, and the southern metropolitan areas specializing in government, transportation, and warehousing continued to suffer.”
For international real estate in particular, “the U.S. still offers the most secure option for investment, especially in the major markets,” Kreusser continued. “But the secondary and tertiary markets will continue to struggle, as will the heavy exposure to the housing industry in Phoenix, Detroit, Atlanta, Las Vegas, most Florida cities, and certainmarkets."
As to the Tri-State area’s commercial real estate market, Robert Sammons, vice president of Cassidy Turley in New York, painted a mixed picture, with stronger numbers in New York City compared to other regional submarkets. New York City’s office vacancy rate of approximately 11 percent at year-end 2011 was second nationally only to Washington, D.C.’s 10 percent, while Northern New Jersey (approximately 15 percent) and Central New Jersey (17 percent) were mid-pack nationally. For New Jersey, one somewhat brighter spot was Jersey City’s 10.2 percent rate.
Lower vacancy rates generally mean higher rents, with New York’s average of approximately $54 per sq. ft. tops nationally at the end of 2011, according to Sammons. Northern New Jersey ($25 per sq. ft.) and Central New Jersey ($24) were again mid-pack. Despite the highest average rents nationally, New York saw four million sq. ft. of positive net absorption in 2011, second only to California’s San Jose-Silicon Valley market. Central New Jersey, in contrast, experienced zero net absorption, and Northern New Jersey saw 1.25 million sq. ft. of negative net absorption.
However, the New York region is not an island unto itself, Sammons noted. “New York does not exist in a bubble,” he concluded. “The dysfunction within the Washington D.C. beltway and such global issues such as the euro zone crisis will continue to put severe pressure on any further recovery locally.”