NEW YORK--(BUSINESS WIRE)--Kroll Bond Rating Agency (KBRA) releases the second research report in its two-part series entitled, “Slowing Rents Bite the Big Apple.”
The first report included two articles: “Office Concessions at Multi-Year High” and “Retail Is Correcting.” In this report, we explore Manhattan’s lodging and multifamily sectors. Due to their short-term leases, these two property types may be more vulnerable to a sharper decline in rental rates if the economy slows.
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:
- 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.
- 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%.
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 this release, we provide submarket year-over-year rental performance for lodging and multifamily.
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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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.
