Jones Lang LaSalle


Cautious Optimism Pervades Forecast
By John Salustri

NEW YORK CITY-Four consecutive years of economic growth is a strong base on which to build a generally optimistic market forecast. And that's exactly what John Powers, chairman of CB Richard Ellis' Tri-State region told a packed house Friday morning at the firm's annual Market Forecast Breakfast. The meeting, before more than 800 Manhattan-based real estate executives, also included a presentation by former Federal Reserve chairman Alan Greenspan, who was interviewed by Boston Properties chief Mort Zuckerman.

There are concerns on the horizon, of course, and Powers noted the damper such issues as oil prices, large and growing national deficits and inflation will have on market growth. Nevertheless, he added, "New York is on a roll."

And the roll should continue to--well--roll, as market forces continue to play out in the sector. Prime among those factors is the continued growth of employment, which should translate into five million sf of increased demand over the next two years. That can only bode well in a market where" clients are as tight for space as ever," Powers said.

Of course, this will be somewhat offset by the nearly 350,000 sf of additional space that is about to appear in the Midtown subsector, thanks in large part to the unfinished New York Times Tower and the building it will leave behind when the company relocates. But the added Midtown space won't dampen the mood so much that tenants won't be paying "a premium for that space," he said.
Other concerns reared their heads, and Powers noted that Manhattan faces ongoing competition from the likes of the New Jersey waterfront, Brooklyn and Long Island City, and it does so at a time when the Midtown construction space is running scarce. Some inventiveness will be in order to stem a possible tide of corporations looking for easier-to-build and cheaper assets in other US cities or even abroad, and Powers cited last year's lost opportunity on the West Side. Opportunities for building still exist west of Eighth Avenue below Times Square, and Powers indicated the rebirth of Penn Station. "It could be transformed in as dramatic a way as Times Square."

Despite the threat of tenants voting with their feet, Powers remained bullish and stated that by year-end the Midtown market will have logged 16 million sf of leasing velocity, and asking rents will be up 10%, Powers predicted. Roomier Downtown will also continue its rebound, and Powers made the bold prediction that 7 World Trade Center, the much-hyped first product to come out of Ground Zero acreage, "will be mostly leased by this time next year."

When the podium was turned over to Greenspan, the talk turned in large part to oil--supply, demand and costs. Then the former chairman of the Board of Governors of the Federal Reserve System sat down for the Q&A with Zuckerman. Despite Powers' enthusiasm for the commercial side of the market, Greenspan, in answer to a question on the housing bubble, stated frankly: "The bottom line is that the boom is over."

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