New York City

Down 2 Places

2012 Rank: 3

2011 Rank: 1

Employment Trends
Total Nonfarm Jobs (thousands)

100 50 0 -50 -100

Absolute Change

Y-O-Y % Change

4%
Year-over-Year Change

2% 0% -2% -4%

08

09

10

11*

12**

Supply and Demand

8
Units (thousands) Completions Vacancy

5% 4%
Vacancy Rate

6 4 2 0

ew York City will maintain one of the tightest vacancy rates in the country this year, though unresolved challenges in the global financial system will create unrest in the securities industry. As homeownership remains out of reach for nearly 80 percent of households in the city, demand for apartments will remain healthy. In sought-after neighborhoods of SoHo and Tribeca, landlords will increase rents to peak levels, while the redevelopment of Lower Manhattan will continue to attract new rental households from other areas. Nonetheless, the lingering European debt crisis and new regulations hitting Wall Street, could cause the financial industry to lose up to 10,000 employees this year. MF Global, for instance, eliminated 1,600 jobs late last year, while cuts at Barclays PLC, Citigroup, and Bank of America will persist in 2012. Residents who are newly unemployed or looking to reduce living expenses will venture to the outer boroughs for more affordable housing. As a result, vacancy in Brooklyn and Queens will compress to the lowest level in nearly a decade. REITs and institutions will expand their portfolios of trophy assets in core neighborhoods, while opportunistic buyers target under-valued properties in the outer boroughs. Developers looking to raise capital will form joint ventures with private-equity funds and acquire redevelopment properties in Manhattan. Additionally, intense competition from REITs will keep cap rates for these assets near 5 percent. The boroughs private investors will target older buildings and reposition properties to capture higher upside over the course of several years. A similar trend will take shape across the East River as investors form syndicates with local operators in Brooklyn. Buyers with a penchant for risk will pay cash for under-performing buildings in Bedford/Stuyvesant, Prospect Heights and Bushwick, while long-term hold buyers will target well-occupied properties in Greenpoint and Williamsburg. 2012 Market Outlook

Risks of Financial Job Losses Loom, but New York Remains a Top Investment Target

3% 2% 1%

08

09

10

11*

12**

Rent Trends
Asking Rents Year-over-Year Change Effective Rents

10% 5% 0% -5% -10%

2012 NAI Rank: 3, Down 2 Places. New York City surrendered the top spot in the ranking due to uncertainty surrounding Wall Street employment. Employment Forecast: After generating 25,000 positions last year, employers will add 68,000 jobs in 2012, an increase of 1.8 percent. Construction Forecast: Robust demand and solid rent growth will prompt builders to move off the sidelines and deliver 6,500 units this year. Vacancy Forecast: Citywide, vacancy at large, market-rate complexes will tick down 10 basis points in 2012 to 2.3 percent. Rent Forecast: Asking rents will spike 6 percent this year to $3,107 per month, while effective rents will soar 7 percent to $3,052 per month. Investment Forecast: As currency exchange rates remain favorable, international investors will purchase institutional-grade assets throughout New York City. To mitigate risk, these buyers will target buildings with public transportation access in neighborhoods with solid rent growth.
Vacancy: 10 bps t Effective Rents: 7.0% s

08

09

10

11*

12**

Median Price per Unit (thousands)

Sales Trends
$160 $140 $120 $100 $80

07

08

09

10

11*

* Estimate

** Forecast

Sources: Marcus & Millichap Research Services, CoStar Group, Inc., RCA

Market Forecast
page 36

Employment: 1.8% s

Construction: 4,750 s

2012 BLACK TEXT VERSION Annual Report