Siegel Sees Fragile Office Recovery Gaining Steam
By James Murdock, Associate Editor
MAY 21, 2003 -- Office owners may have reason for some optimism, according
to the predictions of Stephen Siegel, chairman & CEO of Insignia/ESG Inc.
Delivering the keynote address at CPN's sixth annual Washington, D.C., Metro
Property Opportunities conference last week, he said demand should be
evident in the fourth quarter and could regain momentum by year-end.
Furthermore, citing data from Torto Wheaton Research, he said the nation's
office vacancy rate should decline to 12 percent by 2006, from 16 percent
today.
But the improvement is not a sure thing, with several unknowns having the
potential to stall or reverse it, Siegel continued. In New York City, for
example, the financial services sector continues to be on shaky ground:
4,500 workers were laid off during the month of April alone. And the Big
Apple's overall stability is threatened in other ways, too. "Just about
anything could upset the balance, such as a firecracker going off in a trash
can in the theater district or another terrorist act," Siegel said. And
while Manhattan's real estate markets operate differently than those
elsewhere, they are a trendsetter and could precipitate a prolonged economic
downturn.
Nevertheless, Siegel sees hopeful signs that office markets nationwide are
on the mend. One bit of evidence: The return of sublease space finally seems
to be slowing. "Although it is still negative overall, the negative
retraction is reduced," he said. Even better news is that corporate
tenants--not just service sector businesses--seem to be shaking their 2002
deal-making paralysis. "I remain bullish," Siegel concluded. "I firmly
believe the prediction that at the end of the year, we'll return to somewhat
of a healthy environment. Not a boom one, though."
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