Brokers’ confidence in New York City’s commercial real estate market hit an all-time low in the first quarter of 2023, as it deals with high interest rates, a tough lending environment and low office occupancy, according to a report from the Real Estate Board of New York (REBNY).
Commercial brokers’ confidence dropped for the sixth consecutive quarter, from -45.6 out of 100 in the fourth quarter of last year to -74.7 in the first quarter of 2023, reaching the lowest level since REBNY started tracking the measure by surveying brokers under its current methodology in 2017.
The office industry has been hit with waves of negative news in recent months with a slowdown in leasing activity, a record-high availability rate of 16.1 percent for Manhattan dashing the hopes of a return to in-person work, three banks collapsing, and interest rates that have slowed both the debt and investment sales markets, according to the report.
All of that helped sink commercial brokers’ hopes for the market’s future with their confidence in how the industry would fare in the next six months slipping from -10.7 out of 100 in the fourth quarter of 2022 to -56.9 in the first quarter of this year, according to the report. The scale measures brokers’ positive or negative responses to a set of questions, with -100 representing all pessimistic answers and 100 representing all optimistic answers.
“It’s a recognition that this isn’t going to turn around overnight and is likely going to play out over an extended period,” said Keith DeCoster, REBNY’s director of market data and policy. On the flip side, residential brokers were far less gloomy than their office counterparts. Residential professionals’ confidence in the market increased from -19.4 out of 100 in the fourth quarter of 2022 to -5.6 in the first quarter of this year, bolstered by rising rents and new leasing signings in Manhattan in March, according to the report.
But residential agents’ outlook on the next six months of the industry dropped slightly, from 12.9 out of 100 in the fourth quarter to 11.7 in the first quarter of 2023, thanks to a slowdown in housing development that could limit future home sales growth.
“For many of the residential brokers, the issue is more the lack of supply whether you’re a buyer or a renter,” DeCoster said. “Folks might even buy more if there was additional supply out there.”
