When Will Office Values Plateau?
Investors and lenders take note: Manhattan office values will be static for the next 18 months, says Transwestern’s Mike Gochman (snapped this morning redefining "farm to table" with the help of a Fresh Direct truck outside his office). They’ve surpassed the all-time high, thanks to recent deals like Oxford Properties’ $1,700/SF acquisition of the 330k SF 450 Park Ave from Somerset Partners and Michael Tabor. Average office sales are over $1,000/SF. But rental rates have not followed suit. Plenty of capital may be seeking NYC buildings to squat in, but the finance sector isn’t showing any signs of hiring, and tech, for all the buzz, is just 7% of the local employment base, he says. With those metrics and a declining average SF/employee, underwriters simply cannot continue their assumptions of rental rate growth, and values will stop reaching for the stars.
