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A slower than usual recovery.

Since the end of the Second World War, there hasn't been a recession as deep or complex as the one we are now hopefully emerging from.

It has been a very different economic downturn, to say the least, and as a result we can expect the office leasing recovery in New York and other cities to be slower man in past recessions.

One has to go all the way back to the Great Depression to find a period when corporations have been under such enormous pressure to maintain profits. Their efforts have included inducing retirements, outright firing of employees, closing of factories, cutting wages and fringe benefits, restructuring debt, and eliminating numerous executive perks.

More than ever before, these retirements and layoffs have hit white collar employees at a high rate. Employees who had always been immune to previous recessions, have lost their jobs in this recession. Corporations have learned to get by with fewer workers, and with me advent of more sophisticated inventory controls, with a smaller inventory. This has increased production flexibility, enabling manufacturers to even out their production schedules.

Combining these factors wire me pressure of maintaining or increasing earnings and improving corporate balance sheets, and it is obvious mat corporations will not expand their office space until it becomes absolutely necessary. Yes, we will see lots of tenants moving to more efficient space but that will not translate into taking more space. One building's good fortune is going to come at the expense of another building, which may have difficulty replacing such tenant.

Do not pay attention to the amount of space being leased. It is a meaningless statistic. Another statistic, "vacancy rates" can often be misleading because most of mere are not researched properly. Pay attention to the "demand factor", but only the demand for space beyond what a corporation presently occupies.
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Title Annotation:More Review & Forecast; evaluation of economic recession in New York, New York real estate market
Author:Lilien, Stuart
Publication:Real Estate Weekly
Date:Feb 2, 1993
Previous Article:Public projects encourage economy.
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