Stamford and Manhattan are only a few miles apart, but as far as commercial real estate goes, they might as well be on different continents.
A day before brokerage CBRE announced that Manhattan’s net office absorption in the third quarter exceeded one million s/f, news broke that the 527,424 s/f office building 400 Atlantic Street in Stamford would lose its three largest tenants by 2018.
These two examples are symptomatic of a larger rift. While New York City’s commercial real estate market is booming, Fairfield County, Long Island and Westchester are, at best, stagnating. In order to turn their fate around, suburban office centers will have to reinvent themselves on a scale not seen in decades.
Real Capital Analytics data shows that commercial property prices in Manhattan and the boroughs have almost doubled since 2010, while commercial property prices in the suburbs have essentially stagnated and even fallen behind the already lackluster national average.
A comparison of average office prices and vacancy rates between Manhattan and different suburban sub-markets highlights the extent of the rift.
Between the second quarter of 2013 and the second quarter of 2014, average asking rents per s/f in Fairfield County and Long Island fell by 1.0 percent to $37.20 and by 3.1 percent to $30.01, respectively, according to Cushman & Wakefield.
During the same period the average office rent for Manhattan rose by 4.86 percent to $64.82 per s/f. Manhattan’s current vacancy rate of 10.2% is well below Fairfield County’s 20.5 percent, Long Island’s 17.3 percent and Northern New Jersey’s 20.3 percent.
According to brokers and analysts, the reasons for suburban weakness and urban strength are closely intertwined. “I think it’s mostly a function of the larger trend of people wanting to be in more urban areas,” said Ben Thypin, director of market analysis at research firm Real Capital Analytics. “Companies are moving into the city at the expense of the suburbs.”
Read More: http://www.rew-online.com/2014/10/15/a-suburban-withdrawal/
Ben Carlos Thypin
I am currently the co-founder of Quantierra, the world's first data driven real estate brokerage and investment manager. In my former life as Director of Market Analysis at Real Capital Analytics, I worked with press outlets large and small to provide them with great data and insightful commentary. Here are some of the results of this collaboration. For the rest, please check out the News Archive.