BETHESDA, MD -- In the first in-depth analysis of the Manhattan office market since the devastation of buildings in and around the World Trade Center, CoStar Group, Inc. has concluded that the majority of tenants displaced should have adequate options for relocating within Manhattan. However, many large tenants will find few options to relocate employees into one location.
"In our analysis, we estimated the destruction from the terrorist attacks reduced the overall office inventory in Manhattan by 3.6 percent to 476 million square feet," stated Andrew C. Florance, CoStar CEO. "Prior to the terrorist attacks on the World Trade Center on September 11th, New York City was the tightest office market in the country with a 7.4 percent vacancy rate, but still had 33.1 million square feet available."
CoStar Group estimates that the events of the past week will displace 650 tenants. Nearly 500 are small to mid-sized firms with less than 125 employees occupying less than 25,000 square feet of space. There are currently 3,549 space options available to these tenants in Manhattan or about seven options per tenant. These firms should find adequate space to meet their needs.
In comparison, approximately 150 firms occupying more than 25,000 square feet of space will be entering a more limited, and therefore, competitive office leasing market. There are 268 blocks of space in Manhattan able to accommodate these larger firms. That averages less than two options per firm.
CoStar found that for the five largest displaced tenants, firms needing 400,000 square feet or more, there are no contiguous space options available in New York City in the next six months. These firms will likely have to consolidate into their other existing New York locations, spread employees into multiple new locations or move to outer market areas.
"Over 80% of these displaced tenants will have viable relocation options in Manhattan, but this may not hold true if significant additional structures are deemed uninhabitable," commented Jay Spivey, CoStar director of analytics. "If all of the tenants currently displaced from the World Trade Center were to relocate within Manhattan, we believe the overall vacancy rate could drop to an unprecedented 4.3 percent. These tenants could face higher rents or end up in lesser grade office space."
Florance added, "We are currently working with New York state officials and New York area commercial real estate brokers to accelerate the flow and availability of information to facilitate the quick relocation of displaced tenants."
About CoStar Group, Inc.
Headquartered in Bethesda, MD, CoStar Group, Inc. (NASDAQ: CSGP), is the leading provider of information services to the U.S. commercial real estate industry. CoStar's suite of products offers customers access via the Internet to the most comprehensive, verified database of commercial real estate information in over 50 U.S. markets. The company has approximately 900 employees and contractors nationally, including approximately 650 highly trained commercial real estate research professionals in 27 offices.