New York Real Estate Boom May Be Going Bust

The New York City commercial real estate market’s seven-year run of sky-high rents and sales prices, and ubiquitous construction projects seems to be coming to an end. Although the N.Y. commercial real estate market is stronger than most, a recent report by Newmark Knight Frank warned that the overall vacancy rate of 9 percent, up from 8.2 percent a year ago, shows that there are “clear signs of weakening.”

Developers, who at one time had ready financing and multiple projects, are now complaining that lenders have shut off the flow of cash and are walking away from deals that would have been easily financed in the past. Corporations are also abandoning plans to relocate to Manhattan. For example, last month, London-based HSBC silently backed out of an agreement to move its American headquarters to 7 World Trade Center after bids for its current space came in 30 percent lower than the $600 million it was asking.
Although the long-term impact of the credit crunch is uncertain, for the near future, experts are predicting a significant decrease in construction projects and jobs, massive layoffs on Wall Street, and substantial tax revenue loss on the local and state level.
Source: New York Times