New Achilles Heel
- Mar 03, 2009
Office markets across the country have weakened considerably as the economy has slowed and layoffs mount, but what is becoming increasingly clear is that markets that have a higher percentage of financial services jobs are getting hit harder than those that don’t. Manhattan is the poster child for cities that have a high concentration of banking-related jobs, and recent data shows that New York City is also one of the weakest office markets in the country.Back in the 2001-02 period, markets that were home to high-tech nodes were the most affected. San Jose, San Francisco, Boston, Austin and Seattle were disproportionately affected as the tech meltdown forced companies to hand space back to landlords or throw unwanted space on the sublease market. This time around, the financial crisis is doing just the same but with companies that operate in the financial sector. The markets hit earliest included Orange County, Calif., and suburban Chicago, which have high concentrations of mortgage lenders. But as the credit markets continued to deteriorate, all banking centers were impacted. Other major metropolitan areas that have high percentages of financial services jobs include San Francisco, Boston, Chicago, Philadelphia Dallas and Denver. The banking sector is under intense pressure, and it is reasonable to assume it will hand excess back to the market, just as tech companies were forced to do seven years ago.The key metric to watch is sublease space. Already, Manhattan has seen a surge. Midtown and Downtown show sublease space as a percentage of total vacant space nearing 30 percent. Most of the above mentioned cities are at or above the national average, but in the coming months, sublease space will likely rise quicker in these markets. Interestingly, one major market not listed above is Washington. The latest data shows that the nation’s capital is underweight in terms of financial services, though that may indeed change in the coming years!