KBRA Publishes CMBS Research: “Slowing Rents Bite the Big Apple”

NEW YORK--()--Kroll Bond Rating Agency (KBRA) releases a research report entitled, “Slowing Rents Bite the Big Apple.”

After years of steady increase, Manhattan rents are either declining or experiencing nominal growth. In addition to lowering rents, landlords are handing out generous concessions to fill up vacant space.

While the magnitude of downward pressure on rents and concessions offered varies by property type, none of Manhattan’s major property type groups have gone unscathed. Some notable data points are as follows:

  • Office: Free rent period and tenant allowances each increased by double-digits in 2017.
  • Retail: The market appears to be in correction mode, as the aggregate average rent for ground floor space is down by 18.4%.
  • Lodging: The sector posted its second consecutive year of Average Daily Rate (ADR) declines in 2017.
  • Multifamily: 49% of the new leases signed in January 2018 had some sort of concession, a new record.

So, for a city that never sleeps, it appears that Manhattan has woken up to a softening in commercial real estate market conditions.

On a somewhat positive note, approximately 81.0% of the Manhattan properties that collateralize CMBS loans are situated in submarkets that are performing better than the borough’s overall rental growth rates. In the report, we provide submarket year-over-year rental performance for the above four property types.

In the first release of this report, we will be looking at the office and retail sector, which account for the predominate amount of the Manhattan CMBS collateral ($27 billion; 88% of principal balance). This will be followed by a review of Manhattan’s lodging and multifamily sectors.

Please feel free to reach out to us with any comments or questions on our study. To view the report, please click here.

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About KBRA and KBRA Europe

KBRA is a full service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com
or
Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com
or
Taeho Lee, Associate
(646) 731-2317
tlee@kbra.com
or
Neel Munot, Associate
(646) 731-2457
nmunot@kbra.com

Contacts

Kroll Bond Rating Agency
Analytical Contacts:
Larry Kay, Senior Director
(646) 731-2452
lkay@kbra.com
or
Eric Thompson, Senior Managing Director
(646) 731-2355
ethompson@kbra.com
or
Taeho Lee, Associate
(646) 731-2317
tlee@kbra.com
or
Neel Munot, Associate
(646) 731-2457
nmunot@kbra.com