The consensus at NAI Global’s real estate conference in New York today was clear: there is a light at the end of the tunnel, but that light won’t be shining fully for three to five years.
Addressing more than 100 delegates at its annual commercial real estate outlook forum, NAI Global chief executive officer Jeffrey Finn warned the US commercial real estate market would start to see signs of a recovery in 12 months to 18 months time, but it would be at least three to five years before the market could really take off. “In that window,” he said, “there’s quite an opportunity for real estate investors and tenants.”
That opportunity will not come in the form of a “buy today, sell tomorrow” market, Finn said, but in mid to long-term investments for tenants and investors.
Though Finn stated that he no longer expected to see large pools of distressed property coming to the market continuing to force down prices, he did state that rental rates across the board are still declining and would continue to do so for the next year to 18 months. Vacancy rates, he added, were expected to continue increasing for another 12 months to 18 months.
For Finn, 2010 is the year to begin locking in long-term leases and putting investment dollars to work.
Meanwhile, NAI Global executive managing director Andrew Simon said recent changes in the Manhattan office market were reinforcing the view that the bottom in the property markets could be near. In January and February this year, Midtown leasing had topped 2.2 million square feet compared to 1.2 million square feet of leased space in the same period of 2009 – an 80 percent year-on-year rise.
Although the figures were below the five-year average leading up to 2009, it was a subtle, but positive change.
Despite a current 10 percent vacancy rate in Manhattan’s office market, nearly twice that of 2008, the sector could undergo a significant change once employment figures in New York City begin to turn. Past cycles, according to Simon, have shown that companies take back substantial portions of space they are trying to sub-lease when they sense a change for the better in economic conditions.