In a prior post, we highlighted the number of opportunities available for retailers as developers were becoming increasingly open to building out spaces for particular uses. While this appears to be a golden opportunity for a retailer looking for space in New York City, it may be a sign of concern for landlords and developers.
Essentially, growing demand for retail and office space may drop in the near future, as more companies are looking to renew current leases, and fewer companies look for new space.
For landlords, having lease renewals is obviously a good thing, because it helps create certainty in what can be an uncertain market. According to a recent globest.comreport, lease renewals around the region are up 46 percent compared to the same time last year. Also, the vacancy rate increased to 9.2 percent and demand for space is down by 19 percent.
Indeed, more than 13 million square feet of space has been leased in the first six months of the year, but like the old saying goes, “all good things must come to an end.” Because of this, landlords should become concerned, and this trend is probably a reason behind some of the creative deals we highlighted earlier to attract prime tenants.
This does not mean that the commercial rental market is about to become difficult, but it is a reminder that market corrections should always be a consideration when projecting the financial viability of a project as a developer, or as a tenant, you are negotiating a lease.