Vacancy rates in lower Manhattan offices are likely to hit 11.5 percent by the end of this year and rise to 12.3 percent by mid-2010, according to real estate research firm Reis Inc.
The glut of vacant properties would only worsen if the terrorist-destroyed World Trade Center buildings are replaced before the economy recovers, creating even more unused commercial space. The project has been delayed by ongoing arguments between the Port Authority of New York & New Jersey, which owns the property, and developer Larry Silverstein, who holds a lease on the site for the next 91 years. The two are fighting over who should be paying for most aspects of the redevelopment.
Meanwhile, hundreds of square feet of office space has been abandoned by financial service firms hit hard by the recession. Effective rents have fallen 6.9 percent, according to Reis.
Victor Calanog, director of research at Reis, says the uncertain timing of the redevelopment is muddling the whole WTC redevelopment issue and the plan to have it mostly completed by the tenth anniversary of the disaster. I'm not sure the New York economy will have recovered to a significant degree even by that time to absorb that much space downtown, Calanog says.
Source: The Wall Street Journal, A.D. Pruitt and Christina S.N. Lewis (09/09/2009)