Market Reports

The news and data about the national economy turned more negative throughout the second quarter of 2011, and this trend continued into the third quarter. Despite this turn of events, the New York City Tri-State property markets reported impressive results for the second quarter. For example, in the New York City market itself the overall office availability rate declined to 11.1 percent in the second quarter from 11.7 percent in the first quarter of 2011. For the first half of 2011, 3.7 million square feet of net absorption took place.

While all of the major markets in the City demonstrated signs of strength, the Midtown South market continued its particularly strong performance. Its availability rate fell to 8.8 percent in the second quarter; down from 9.4 percent in the first quarter of 2011 and 11.0 percent in the second quarter of 2010. In a few of the districts within the Midtown South market, there is virtually no Class A space available for lease. The emergence during the last several years of a dynamic high tech industry in the Midtown South market represents one the major drivers of the demand for space. Employment in the Computer Systems Design and Related Services sector has increased by 11.8 percent since 2009 and 16.2 percent since 2007. This growth in high tech is helping to offset the slower recovery in the financial services industry.

The Central and Northern New Jersey markets have a better tone to them even though the overall performance statistics have remained essentially unchanged during the past year. In Northern New Jersey the availability rate was 19.9 percent, which is up from 19.0 percent in the first quarter and 19.6 percent one year ago. In Central New Jersey, the availability rate declined to 20.7 percent from 21.4 percent in the first quarter of 2011 and 21.1 percent in the second quarter of 2010. Asking rents in both of the New Jersey markets are flat over the last year, resting at $22.42/sf in Northern New Jersey and $22.31/sf in Central New Jersey at the end of the second quarter. Employment is up 0.4 percent over the last year in the combined markets. While not particularly robust, this upward trend represents a significant change from the region’s experience during the last three years and has contributed to the improvement in leasing and sales activity.

The story is very similar for the Fairfield & Westchester County markets. Small gains in employment and a slow rebound in economic activity have stabilized property market conditions in both markets. In fact, in the Fairfield County market the availability rate is down to 20.6 percent from 21.6 percent one year earlier. The availability rate is up slightly in the Westchester market, ending the second quarter of 2011 at 17.9 percent.

Both the New Jersey and Fairfield & Westchester County markets are sensitive to national business trends; meaning a downturn in economic activity could impact the demand for property space in those two markets. New York City’s economy, though, remains closely tied to global economic trends, and its property markets should continue to improve for the rest of 2011.