|
 SERIOUSLY
RICH
RESIDENTIAL
Office rents: Biggest plunge in
25 years
Enormous growth in sublease space
pushed Manhattan office rents to their biggest quarterly decline in 25
years as they fell 6% in the first three months of this year,
according to a report released Tuesday by Cushman & Wakefield Inc.
Rents fell to an average of $65.01
a square foot in the first quarter, and the $4.43 drop from the end of
2008 was the largest quarterly descent since Cushman began keeping
records in 1984.
Rents have slid 11% since hitting a
high of $72.97 a square foot in the third quarter of 2008. By the end
of the year, rents are likely to plunge 30% from their peak, according
to Joseph Harbert, chief operating officer of Cushman &
Wakefield’s New York Metro region.
“Sublease space is on the rise,
tenant demand has decreased and landlords are becoming more
competitive to attract new tenants and retain current ones,” Mr.
Harbert said. “The net result is rents falling faster than they did
in the last two recessions.”
The rent slump comes as the amount
of sublease space on the market nears a five-year high. Sublease space
more than doubled to 10.3 million square feet at the end of the first
quarter, up from 4.4 million square feet a year earlier.
Sublease space places downward
pressure on rents because the companies looking to shed their excess
space offer it at deep discounts to what the building’s owner is
asking for leases.
Mr. Harbert cited an average 15% to
20% difference between a rent asked by a sublessor and a landlord. But
in some neighborhoods the difference is much higher, especially when
struggling financial firms (which lease about a third of Manhattan’s
office) enter the equation.
On Park Avenue, which is awash is
sublease space from struggling financial firms, landlords are asking
an average of $107 a square foot compared to subleases of $72.30 a
square foot—a difference of 48%.
“You can do a deal on Park Avenue
in the 50s [dollar a square foot range],” he said.
The rise in sublease space was a major factor in pushing the overall
vacancy rate for Manhattan to 9.6% in the first quarter, up from 6.1%
at this time last year and the highest level since the third quarter
of 2005.
Midtown, home for many banks and
brokerages, had the highest vacancy rate, at 10.5%. Rents in that
neighborhood fell 8% from the fourth quarter of last year through the
first three months of this year. They have tumbled 13% since the third
quarter of 2008, when they peaked at $84.48.
A dearth of tenants has also helped
push up vacancy rates throughout Manhattan. Leasing activity totaled
only 3 million square feet in the first quarter, making it the least
active first quarter on record. Overall leasing activity tumbled 39%
from the year-ago period.
The dismal state of the leasing
market certainly won’t help bolster the moribund investment-sales
market. During the first quarter, transactions valued at $10 million
or more totaled $1.1 billion, down 31% from the year-ago period.
Fifteen deals closed during the first quarter, compared with 25 in the
first three months of last year.
“The larger issue is the
inability to get debt financing,” Mr. Harbert said. “It is going
to take a while for the situation to work itself out.”
The outlook seems grim. There are
only $100 million worth of properties under contract now, down from
$3.5 billion a year earlier. - 2009
April 07 CRAINS
Vacancies in prime office
buildings soar 66%
Vacancy rates for Class A office
space in the city have soared 66% over the last 12 months according to
a new report from Jones Lang LaSalle, hitting 11.9% as the first
quarter draws to a close.
The preliminary first-quarter
results revealed that midtown fared even worse, with Class A office
vacancies soaring to 13.5%—the highest rate recorded since Jones
Lang LaSalle began tracking vacancies in 1995.
The broader picture was not quiet
as bleak. Citywide, there was a 55% increase in vacancy rates across
all types of office buildings, according to the report.
“We are likely to see vacan
cy rates rise across the entire
city as companies continue to merge, downsize or file for
bankruptcy,” said James Delmonte, vice president and director of
research at Jones Lang LaSalle.
According to Mr. Delmonte, there
have been just four signed leases for space larger than 100,000 square
feet so far this year, compared with more than 17 during the first
quarter of 2008. What’s more, all of this year’s top three deals
were renewals rather than new leases. The largest lease renewal was
the one signed by Polo Ralph Lauren for 193,000 square feet at 25 W.
39th St. earlier this year.
As more office space comes onto the
market, asking rents are beginning to plummet. Overall, asking rents
in the city fell about 10% over the last 12 months, dropping to $64.43
per square foot in the first quarter. Class A rents fell 11% to $74.88
per square foot for the quarter. Meanwhile, Class B rents fell more
than 12% to $49 per square foot.
Meanwhile, the gap between rents
that landlords are asking for and those that tenants end up agreeing
to pay, is ballooning. Deals have been getting done at a discount of
as much as 30% once concession like months of free rent are included,
notes Mr. Delmonte.
“Rents are tied to employment
projections,” he says. “Job cuts are expected through at least the
first quarter of 2010 and we can expect asking rents to continue to
fall.” -
2009 March 26 CRAINS
Are Deals Financable?
Fillmore, Deutsche Bank Pact Hit a Snag
CB Richard Ellis Investors is back
in the bidding for the office portion of 1540 Broadway, a skyscraper
in New York's Times Square connected to landlord Harry Macklowe.
A deal hasn't closed, but a person
familiar with the matter said CBRE Investors, the asset-management
unit of CB Richard Ellis Group Inc., would pay as little as $355
million, a major drop in value.
"That's a harsh price for a
very well located building," said Dan Fasulo, managing director
of property-tracking firm Real Capital Analytics.
According to city records and
loan-marketing documents, Mr. Macklowe attributed the value of the
office building to over $950 million when he bought it in February
2007 as part of a $7 billion skyscraper spending spree. The tower's
880,000 square feet of office space had sold in 2006 for $525 million.
In early 2008, unable to refinance
short-term debt, Macklowe Properties handed back control of the seven
skyscrapers to lenders led by Deutsche Bank AG. Deutsche has been
trying to sell 1540 Broadway along with the nearby Worldwide Plaza,
also part of the Macklowe portfolio. Eastdil Secured is the sales
broker. CBRE was in the mix early for 1540 Broadway, then hedge fund
Fillmore Capital Partners LLC was close to securing both towers. The
Fillmore deal died last week, putting CBRE's deal back in the saddle,
according to several people familiar with the matter.
- 2009 February 18 WALL
ST. JOURNAL
An effort by real-estate hedge fund
Fillmore Capital Partners and Deutsche Bank AG to salvage a troubled
debt investment in two prominent Manhattan skyscrapers has hit the
rocks.
A contract was expected to be
signed Monday in which Fillmore would acquire Worldwide Plaza and 1540
Broadway, office properties once worth a total of more than $2
billion. New York landlord Harry
Macklowe had purchased the towers as part of his ill-fated
acquisition of seven skyscrapers in 2007. Unable to refinance the
buildings' debt, Mr. Macklowe turned control of the towers back to
Deutsche Bank, the holder of the $1.2 billion first mortgage, in early
2008.
Last-minute talks late Sunday for
Fillmore -- a junior "mezzanine" lender on the properties --
to buy the towers using Deutsche Bank financing fell apart, according
to people familiar with the matter. It was unclear what caused the
snag. One person familiar with the matter says there is still a small
hope a deal could happen. The deal was so close to getting done the
current buildings' management had been instructed to turn over the
property Monday. That decision was reversed late Sunday.
Deutsche Bank, Fillmore and the
other lenders involved had been trying to sell the properties since
early 2008. And Deutsche Bank had agreed to provide financing to
prospective buyers -- an incentive given the dreadful state of the
credit markets. Early bids came in above $2 billion. But a tentative
deal for General Electric Co.'s NBC Universal to take space in the
pyramid-topped Worldwide Plaza, at 825 Eighth Ave., never
materialized. That discouraged potential buyers who calculate returns
on investment based on how much cash buildings generate from rent
collections.
Executives from all parties
involved either didn't return calls or declined to comment.
- 2009 February 9 WALL
ST JOURNAL
The travails of New York developers
Harry Macklowe and his son, William Macklowe, continue. A mezzanine
lender on 1330 Sixth Ave., an office tower Macklowe Properties
purchased in 2006, has moved to auction off its interest in the tower
after its loan matured.
The mezzanine lender is Cadim, the
real-estate arm of Canadian pension manager Caisse de Dépôt et
Placement du Québec. Cadim lent $130 million to the building and
holds the most senior portion of several mezzanine slots. The loan
matured Jan. 9. Other more junior mezzanine holders include Deutsche
Bank AG, which also originated the $240 million senior mortgage. That
loan was securitized.
The Macklowes, who have $100
million of equity in the project, purchased the 42-story tower in late
2006 for nearly $500 million, more than three times what it sold for
six years earlier. The tower has a substantial amount of vacant space.
Mr. Macklowe, who last year had to
hand back control of seven skyscrapers and sell four others because of
debt problems, hired Carlton Group to find new investors to replace
Cadim at 1330 Sixth Ave. Cadim then hired Eastdil Secured to run the
auction. The auction is scheduled for April 22. Talks continue among
the various parties. A Macklowe spokesman declined to comment. A Cadim
spokesman declined to comment.
- 2009 March 17 WALL
ST. JOURNAL
Manhattan Won't Avoid Property
Crunch
Manhattan prices fall most in 5
years
Number of 2008 sales falls 23%;
units put up for sale jump 41%
Manhattan apartment
sellers cut prices by the most in five years last year and unsold
inventory rose to the highest since 1999 as the economy retreated.
The average listing discount
climbed to 4.1 per cent, the highest since 2003, as buyers negotiated
for reductions off the asking price. The number of condominiums and
co-ops for sale jumped 41 per cent last year to 9,081 even as the
median price reached a record US$995,000, appraiser Miller Samuel Inc
and broker Prudential Douglas Elliman Real Estate said on Tuesday.
New York City is bracing for a drop
in property values after three of the five largest investment banks
collapsed. In the Hamptons, on the eastern end of Long Island, prices
are already falling. Banks and securities firms have cut more than
180,000 jobs in the past year, according to Bloomberg data, as the
recession entered its second year and the global credit crisis forced
writedowns and mortgage-related losses of US$1.18 trillion.
'There clearly was long-running
irrational exuberance out here in real estate,' said Diane Saatchi,
senior vice-president for broker Corcoran Group Inc, in East Hampton.
'It's gone full circle from people who would pay any price because
they had to have the house, to people who pick a price and take any
house at that price as long as they think it's discounted.'
The median price in the Hamptons,
New York's summer playground for the rich and famous, fell almost 13
per cent last year to US$850,000, the first decline since 2000.
Discounts on Hamptons homes rose to 11.1 per cent in 2008, according
to Miller Samuel-Prudential data.
Wall Street firms are expected to
lose US$47.2 billion in 2008 and further shortfalls are expected in
2009, Mayor Michael Bloomberg said last week.
Budget officials assume the city
will lose 294,000 jobs from mid-2008 through 2010, including 46,000 in
financial industries. The mayor is founder and majority owner of
Bloomberg News parent Bloomberg LP.
The firings mirror the national
recession that has driven unemployment in January to the highest since
1992 and pushed home prices down the most since the Great Depression.
The securities industry accounted
for 51 per cent of the growth in wages in Manhattan's private sector
from 2003 to 2007, according to the US Bureau of Labor Statistics.
'Prices have to drop,' Dottie Herman, chief executive officer of
Prudential Douglas Elliman, said in an interview. 'They have to, have
to, have to - and they have.'
In Manhattan, the number of sales
declined 23 per cent last year from 2007, Miller Samuel and Prudential
said. Falling sales and rising inventory preceded lower home prices
nationwide.
The increase in inventory in
Manhattan was largely driven by a slowdown in transactions in the
second half, said Jonathan Miller president of Miller Samuel.
The median sales price for the
entire year rose 11 per cent to a record US$955,000, according to the
report. The gain mostly reflects deals from the first half of the
year, before the collapse of Lehman Brothers Holdings Inc, and
closings from new condominium developments.
The Miller Samuel-Prudential report
also shows the heights that Manhattan's real estate market achieved
over the last decade, a period of easy credit.
In 1999, the median sales price of
all Manhattan apartments was just US$310,000.
By 2004, it almost doubled to
US$605,000. The average price per square foot rose from about US$400
in 1999 to US$1,251 last year, the report said.
The median price of two-bedroom
apartments rose 178 per cent since 1999 to US$1.6 million last year.
One bedrooms rose by 200 per cent over that time, to a median of
US$750,000 last year. Three-bedrooms sold at a median price of US$3.79
million, a 161 per cent increase from 1999.
Prices have also skyrocketed for
Manhattan townhouses. In the past decade, the median has risen 156 per
cent to US$4.995 million.
They jumped even higher for the
category known as 'luxury townhouses', which Mr Miller defines as the
top 10 per cent of all sales. The median jumped last year to US$31.8
million, up from US$6.5 million a decade ago.
Now the market is making an about
face. Prices for luxury apartments in Manhattan, defined by Ms Herman
as units selling at US$3.5 million and above, are now selling at
discounts of about 25 per cent off the asking price, she said.
A three-bedroom, three-bathroom
condominium on Tribeca's Hudson Street is now selling for US$4.6
million after being lowered almost US$1.3 million since August,
according to Streeteasy.com, a property data service. A condo in Trump
Tower on Fifth Avenue in midtown was cut 16 per cent to US$4.95
million since it was first listed in November.
The Financial District, which saw
the largest year over year price increase for co-ops in 2007, was the
neighbourhood with the largest price per square foot decline in 2008,
according the report.
The price per square foot for
co-ops there declined by almost 19 per cent to US$857 in 2008, the
result of lowered demand spurred by Wall Street layoffs, the report
said.
'You're going to see stronger, less
attractive numbers' in the first quarter, said Ms Herman.
The reported available inventory
tally does not include new developments where units have yet to go on
sale, Mr Miller said. 'That is definitely an undercount,' he said.
'There's a lot of shadow inventory in the background.'
The trend is likely to continue,
said Damon Liss, an interior designer who is now trying to sell a
three-bedroom cottage in East Hampton with a swimming pool for more
than US$1 million.
'There's a big disconnect between
buyers and sellers,' Mr Liss said. 'Buyers want 50 per cent discounts
and sellers don't want to reduce the price at all. That's why
transactions are down. Both buyers and sellers are being equally
unrealistic.' -
2009 March 5 Bloomberg
When it comes to property prices, that strip of rock just south of
the Bronx is often perceived as invincible.
Across the U.S., house prices have fallen 19% from their peak,
according to the S&P/Case-Shiller Home Price index. New York City,
as a whole, is down 10%.
![[Manhattan condo prices]](//s.wsj.net/public/resources/images/MI-AS493A_REALH_NS_20080921190427.gif) 
Meanwhile, on planet Manhattan, the median price of an apartment
rose above $1 million for the first time in the second quarter of
2008, according to Miller Samuel, a real-estate appraiser.
Even in Gotham, reality bites eventually. Three big problems are
likely to hit in 2009.
First up: Job losses on Wall Street. In 2006, the most recent full
year of New York State Department of Labor data, finance and insurance
companies employed 15.7% of Manhattan's workers. They earned an
average of $269,000, more than 2.5 times the average private-sector
wage. Property prices will suffer from slashed bonuses and submarine
stock options, not to mention the pink slips.
Wall Street's woes also mean tighter credit. The Federal
Reserve's
latest "beige book" survey of financial conditions says this
of a softening Manhattan condominium and co-op market: "A growing
number of deals are said to be falling through, due to difficulty in
getting financing -- largely at the middle of the market."
The third headwind is a stronger dollar. Jonathan Miller, Miller
Samuel's president, estimates one in three new apartments are sold to
foreigners, primarily Western Europeans. - 2008
September 22 WALL
ST JOURNAL
Real estate market girds for
Lehman fallout
Manhattan
vacancy rates to rise as building prices fall
The fallout from Lehman Brothers’
bankruptcy could push Manhattan’s commercial real estate vacancy
rate up to nearly 10% by the first quarter of next year, according to
a report Monday from real estate brokers Jones Lang LaSalle.
The impact will likely fall hardest on Class A midtown buildings,
where the vacancy rate could skyrocket to 12% if the bank disposes all
of its space, according to the report, based on its estimate of Lehman
holding 2.7 million square feet of space. Currently, vacancy rates for
midtown Class A properties as well as in Manhattan overall are running
at 8%.
Lehman Brothers owns its 1 million square foot headquarters at 745 7th
Ave. while leasing acres of space at other locations including 399
Park Ave.
“The effect is going to be pretty dramatic,” says Peter Riguardi,
president of Jones Lang LaSalle’s New York Market.
Those estimates don’t include the fallout from Bank of America’s
sudden acquisition of Merrill Lynch or American International
Group’s enormous problems. Bank of America executives on Monday said
they aim to cut $7 billion in costs from Merrill, which will almost
surely mean shedding staff and space. Merrill leases 4.2 million
square feet at the World Financial Center but only occupies about 2.6
million feet of it. It also leases an additional 850,000 square feet
in various locations in Manhattan.
Mr. Riguardi notes that AIG occupies about 3 million square feet of
space downtown. AIG owns its 775,000 square foot headquarters at 70
Pine Street and in June signed a lease for 800,000 square feet nearby
at 180 Maiden Lane, where it planned to consolidate office it has
scattered around downtown.
Real estate executives say the turmoil
could drive rents down between 15% and 20% by next year. Until now,
asking rents have remained strong, jumping 21% to $71.59 per square
foot in the second quarter from the same period in 2007, according to
Cushman & Wakefield.
The tumult on Wall Street was already hurting Manhattan's office
market. The vacancy rate climbed to 7.1% in the second quarter, up
nearly 2 percentage points from the year-ago period, according to
Cushman & Wakefield Inc. In addition, brokers say that tenants are
taking longer to sign leases. That sluggishness comes at a time when
troubled financial firms are retrenching, adding more space to a
market that now has 20 million square feet available—up 35% from a
year ago.
The problems will also further depress the market for commercial
office towers. ast year, Manhattan office buildings fetched an average
of $972 per square foot, according to Cushman & Wakefield. At that
rate Lehman’s HQ would fetch nearly $1 billion. Experts say that sum
is now highly unlikely.
AIG’s headquarters would be considered less attractive than
Lehman’s because it is older and located downtown. Typically,
midtown towers fetch higher prices than their counterparts in the
financial district.
- 2008 September 15 CRAINS
NY
Who Needs a
Mortgage Anyway?
While the mortgage markets have
been convulsing, Wall Streeters have been completing one big-ticket
deal after another, buying condos, co-ops and town houses at some of
New York's most prestigious addresses.
In January, Lloyd C. Blankfein,
chief executive of Goldman Sachs, closed on a $26 million duplex at 15
Central Park West, one of Manhattan’s hottest new buildings. Scott
A. Bommer, a hedge fund manager, bought a Fifth Avenue co-op for $46
million. And Edgar Bronfman Jr., part of a private equity consortium
that owns the Warner Music Group, spent $19.5 million for his own
Fifth Avenue co-op.
As the mortgage mess deepened, the
deals rolled on. In February, Raymond C. Mikulich, until recently the
head of the real estate private equity group at Lehman
Brothers, paid $17.9 million for a four-bedroom apartment at
15 Central Park West. Then Philip A. Falcone, a senior managing
director at Harbinger Capital Partners, a hedge fund, closed on a deal
to buy the Upper East Side mansion that once belonged to Robert C.
Guccione, founder of Penthouse magazine, for $49 million.
James E. Cayne’s $28 million
purchase of two units in the Plaza was not the biggest deal, but it
was among the most awkwardly timed. A few weeks after the second deal
closed, the Wall Street firm where he is chairman, Bear Stearns,
collapsed. -
2008 April 2 NEW
YORK TIMES
NEWS
In a sign of how commercial real estate values in Manhattan have
deteriorated, a 21-story building there, one of the last to sell
before the credit crisis, is under contract to sell again at a loss of
$41 million. - 2008 July The
New York Times
US retail malls' Q2 results
worst in 30 years
Strip malls seeing average vacancy rates spike sharply
US store closings and cutbacks
turned the second quarter into the worst for strip mall owners in 30
years, as increasingly budget-conscious consumers flocked to low-cost
warehouse-style grocery centres, according to a report by real estate
research firm Reis.
Strip malls, which are usually
anchored by grocery or drug stores, saw average vacancies spike 0.5
percentage points to 8.2 per cent, a level unseen since 1995,
according to the report released yesterday.
Vacancies at regional malls rose
0.4 percentage points to 6.3 per cent, the highest level since the
first quarter of 2002, according to the preliminary results.
'They definitely came up weaker
than our expectations and we've been pretty bearish on our outlook for
retail for some time,' Reis chief economist Sam Chandan said.
'In the market in general there
have been a lot of store closings.'
A growing list of retailers
shuttered stores ahead of lease expirations or chose not to renew
leases, and as newly completed space hit the market without signed
tenants.
Starbucks Corp recently said it
would close 600 stores by March.
GAP Inc is looking to give up some
of the 40 million square feet of retail space its leases.
That's in addition to the growing
list of retailers, such as Linen 'n Things and Goody's Family
Clothing, which filed for bankruptcy protection.
Consumers are constrained by
increases in food and energy costs, as well as the cost of servicing
debt run up during the housing boom.
In addition to cutting back on
clothing, jewellery and non-essentials, they have turned to
lower-price grocers such as Wal-Mart at the expense of the upper end
usually found at strip malls, such as Whole Foods Market Inc, Reis
said.
For the first time since 1980, more
space became available to rent at strip malls than was rented out -
about 3.2 million square feet more.
Part of the available space came in
the form of 5.7 million square feet of new development that came on
the market during the quarter.
The extra space translated into
falling rents at strip malls, down 0.1 per cent to an average of
US$17.60 per square foot.
'The downward pressure on rent is
coming from landlords being very nervous about the idea of losing a
tenant when they know that there's a paucity of replacements for that
tenant in the current market environment,' Mr Chandan said.
Preliminary figures show that
regional malls were barely able to raise rents, with just an anaemic
0.2 per cent rise excluding concessions, its weakest gain since the
second quarter. -
2008 July 8 REUTERS
Taking Manhattan
A new record price for an office building defies the recession
talk
It is said that nobody ever made money by owning the General Motors
building, only by selling it. And yet again the Manhattan landmark
building by the south-eastern corner of Central Park is about to
change hands for a price that seems justified only by the greater-fool
theory that one day someone will be willing to pay even more. In the
first round of bidding, there were several offers of $3 billion, which
would be a new record for a single building in America beating the
$1.8 billion paid last year for nearby 666 Fifth Avenue. Hopes are
high that the final price will be well above that.
No one hopes so more fervently than the owner, Harry Macklowe, who
needs it to fetch at least $3.4 billion in order to repay a loan, for
which the building is collateral, from the publicly traded hedge-fund
group, Fortress. Mr Macklowe is in trouble because he paid too much
for properties offloaded by the private-equity giant, Blackstone, from
the portfolio of Equity Office Properties, a property firm it bought
for a record last year, in the final gung-ho days before credit dried
up. Reportedly, the rents on the GM building
barely cover the interest on the mortgage.
Mr Macklowe bought the skyscraper for $1.4 billion in 2003, from
owners such as Donald Trump, who regrets selling. One of the defeated
bidders then, Sheldon Solow, is still contesting in court the decision
to sell to Mr Macklowe, whose improvements to the building include
introducing a super cool Apple Store in front of the famous FAO
Schwarz toy shop.
At the very least, this high-priced bidding war suggests that New
York's commercial real-estate business is in better shape than some of
the city's banks. Yet, as a trophy property, the price offered for the
GM building may say more about the continuing robust financial health of wealthy buyers than incremental
changes in demand for office space in New York.
There is also the falling dollar. A report from Cushman &
Wakefield, a property adviser, reckons that with average rents of $100
a square foot, New York ranks only the tenth-most-expensive among
global cities in which companies like to put their headquarters. One
bidder reportedly has strong backing from Arab investors. This is a
sign that the weak dollar is making American assets attractive to
foreign shoppers with cash to splash.
- 2008 February 21 THE
ECONOMIST
Office rents drop as space hits
market
Manhattan's
once red-hot commercial real estate market is developing a chill
Vacancy rates are edging higher.
The pace of new lease signings is flagging, and the volume of sublease
space hitting the market is soaring.
More important, for the first time
in six years, effective rents have begun to fall.
"There's no question that
rents are lower than they were last year," says David Falk, an
executive vice president and principal at Newmark Knight Frank.
That trend is all but certain to
accelerate as financial firms, which account for roughly a third of
Manhattan's rented space, shed staff and space amid the credit crisis.
GVA Williams Vice Chairman Mark
Friedman reckons that effective rents, which include the cost of
concessions offered by landlords, have already fallen by about 7%. GVA
found that in the first quarter of the year, midtown landlords
typically gave tenants three to six months of free rent, up from zero
to six months in the year-ago period. Similarly, they upped the amount
they were willing to give to tenants for improvements to $40 to $50 a
square foot, from $35 to $45 a square foot.
Mr. Friedman predicts rents will
eventually drop 15%.
The downward pressure stems from
two factors: sagging demand for space caused by the weakening economy
and an avalanche of sublease space expected to hit the market in
coming months.
Just starting
Financial firms, battered by billions of dollars of losses from
write-downs of the value of subprime mortgages and a growing list of
other products, are just beginning to shed space. In the last year
they've laid off 22,000 people, according to a Crain's
estimate. Experts forecast that 33,300 Wall Street jobs will disappear
by next year.
Mr. Falk estimates that 4 million
square feet of sublease space will be unleashed in midtown alone as
financial firms and others unload space amid a slowing economy. Just
last week, drug giant Pfizer quietly laid plans to unload 750,000
square feet of space in midtown.
J.P. Morgan Chase is expected to be
one of the largest space shedders. It could eventually unload 1
million square feet of space as it digests its purchase of Bear
Stearns. Sources say Lehman Brothers is looking to unload roughly
600,000 square feet of space, while Citibank is believed to be freeing
up nearly 240,000 feet at two locations.
In the last five months, 5.3
million square feet of sublease space has landed on the market, a jump
of 51%. That space now accounts for 19% of the 27.5 million square
feet available. Experts say that when sublease space reaches 35% to
40% of the total, it begins to pull all prices down. If Mr. Falk is
correct, that tipping point could be reached in just a few months.
The problem is that sublease space
is typically less expensive than space rented directly from a
landlord. In May, Cushman & Wakefield Inc. reported that sublease
space was nearly $14 a square foot—or about 15%—cheaper than
direct space.
Bleak outlook
With oil prices rising and the economy softening, the outlook on the
demand side is also bleak.
"The bottom line is that I
don't think that corporate America is about to come in and gobble up
space," says Mr. Friedman.
As a result, brokers expect that
the gap between landlords' posted prices for space and what tenants
actually pay will continue to widen. Mr. Falk says that, on average,
tenants are signing leases that are $5 to $10 a square foot below the
asking rent, up from $3 to $5 a square foot last year. The average
asking rent in Manhattan is $85 a square foot.
The good news is that even with all
the space that has been added to the market in recent months, the
vacancy rate in Manhattan stands at a puny 6.8%, which is low by
historical standards and gives landlords the edge. The question is,
for how long? The vacancy rate has already risen 1.3 percentage points
this year.
"It's clearly a more balanced
market," says Brian Gell, a vice chairman at CB Richard Ellis
Inc. "Tenants are more cautious, but those who are prepared to
act will benefit."
SALES HARDER TO FINANCE
The good news for buyers of Manhattan office buildings is that prices
are down. The bad news is that financing such deals remains dicey.
Two weeks ago, three properties that lenders had taken back from Harry
Macklowe for failing to repay a loan were sold at prices 20% to 30%
lower than what he had paid a year earlier.
But with lenders now demanding that buyers lay out 30% to 50% of the
deal value in cash-up from 10% to 30% a year ago-volume has shriveled.
In the first five months of this year, 33 office towers were sold,
a drop of 63% from a year ago, according to Real Capital Analytics.
Scott Latham, an executive vice president at Cushman & Wakefield
Inc., notes that worries about a weakening economy have put buyers on
the sidelines.
"They are waiting to see what happens," he says.
- 2008 June 21 CRAINS
Manhattan
office demand strong
Demand for Manhattan office space remains strong and will dip only
slightly in the new year, according to a third quarter report by
Marcus & Millichap Real Estate Investment Services. By year's end,
Manhattan employers were expected to have created 36,000 jobs for a
1.5 percent gain, the report said. A limit of new supply and strong
demand were expected to lower the vacancy rate in 2007 by 100 basis
points to 6.3 percent. But turbulence in the global financial markets'
could lead to job cuts in the Manhattan financial services sector,
which could tamp down demand for office space.
A total of 708,000 square feet of for-lease office space was expected
to be built in Manhattan in 2007. Asking rents jumped by 18 percent
this year to $60.71 per square foot, the report said, while effective
rents were expected to increase 20.8 percent to $54.15 per square foot.
- 2007 December 12
Midtown Manhattan
Office Rents Exceeds Dot-Com Peak
Average effective rental rates for Class-A office space in Midtown Manhattan have surpassed
the all-time high rental rates reached during the dot-com peak at the end of 2000. According to the Studley Effective Rent Index (SERI)
covering Midtown and Downtown, Midtown's spike in rental rates is due to a number of real estate components impacting pricing, namely higher real
estate taxes, operating expenses, and electricity costs, not to mention supply and demand.
The national SERI report indicates rental
rates are steadily increasing in markets throughout the United States,
and Midtown Manhattan follows suit, although its effective rental
rates are markedly higher than in most other major tier-one markets.
Midtown New York's average rent of $75.42 per sq. ft. is 1.2% higher
than 2001's peak rate. Downtown New York's average effective rent of
$40.95 per sq. ft., however, is 18.2% lower than the peak value, not
even close to the levels achieved during the dot-com heyday.
"The entire business landscape has changed since 2000," says
Steven Coutts, senior vice president of Studley's National Research
Services. "Prime office buildings have been trading for amazingly
high prices for several years with landlords garnering higher rents as
a result of the dearth of product in Midtown. It's a domino effect ?
the increase in building revenue escalates the building's value
leading to higher property taxes thereby increasing the total rent
even more."
Operating expenses have also increased over the last five years, says
Coutts, who attributes some of this to the added security in buildings
post 9/11. From 1995 to 2000, average operating expenses increased
from $6.75 per sq. ft. to $7.82 per sq. ft., a 16% increase, but
operating expenses increased by 30% in the succeeding five-year period
between 2000 and 2005.
"Interestingly, average increases in electricity costs over the
past 10 years have been moderate, averaging 3.1% annually," adds
Coutts. "But in the last year, average costs jumped by 13.5% as
the nation grapples with the current energy crisis." -
29
June 2006
RESIDENTIAL
In a Hot
Market, All the City Is a Condominium
East Side, West Side, all around town, every form of real estate, no
matter the tenancy, is being sold to investors for conversion into
residential condominiums. They range from four-story buildings in
TriBeCa that are selling for more than $550 a developable square foot
to tennis facilities in Queens to factories in Long Island City to
parking garages and vacant lots.
Over the last decade, a number of office buildings in Lower Manhattan
have been converted into residential towers. Last week, Kent Swig,
president of Swig Equities, signed a contract to buy a 103-year-old,
landmarked, 21-story, 540,000-square-foot building at 25 Broad St. It
was bought in 1994 for $5 million by Crescent Heights. Crescent spent
$55 million in 1997 to redevelop it into 347 apartments, 21,400 square
feet of retail and commercial space, and 6,800 square feet of office
space. Industry sources said the property sold for $260 million. Also
last week, a joint venture of Worldwide Holdings and Lubert-Adler
entered into a contract to sell an office building at 88 Greenwich St.
to Thorwood Real Estate, a partnership of Joseph Sitt and Andrew
Heiberger, for $195 million. The 365,000-square-foot, 72-year-old
building was converted into 458 apartments in 2000.
Thorwood is also buying a building at 158 Madison Ave. and will
convert it into a 22-story loft condominium.
A 95-year-old, 185,000-square-foot office building at 485 Fifth Ave.
will be sold next month to a joint venture of Michael Belfonti, Adam
Hochfelder, and the Carlyle Group. The partnership will pay $88
million to a group of investors including Jack Forgash, which
purchased the former Rogers Peet building for $54 million earlier this
year. The buyers plan to convert the property into condominiums.
Last month, Monday Properties entered into a contract to buy a
20-story, 210,000-square-foot office building at 386 Park Avenue South
from Park South Control for $71 million. Industry insiders think it
will be converted to condos.
The 143,000-square-foot Stuart Dean Building at 355-366 Tenth Ave.
will be sold and converted into a residential tower. Insiders said
Gary Barnett's Extell Development will pay $25 million for the site.
Extell recently bought the one-story Ritz Furs shop on 57th Street
between Sixth and Seventh avenues, as well as the transferable air
rights. It plans to demolish the building and construct a 37-story
condominium tower.
New York City is losing tennis courts. Two years ago, a tennis center
atop a parking garage on 31st between Fifth Avenue and Broadway was
sold and converted into a Con Ed substation. The 6-acre East River
Tennis Club on the waterfront at 44-02 Vernon Blvd. in Long Island
City has closed to make way for a major residential development: two
condominium towers with a total of 1,080 units and two rental
buildings with 1,100 units.
A few years ago, Eagle Electric moved its manufacturing operations to
Mexico. Earlier this year, the Andalex Group bought one of its
buildings at 45-31 Court Sq., near the 48-story Citigroup tower in
Long Island City. It plans to renovate the property into 238 luxury
condominiums. Another facility in Astoria at 21st Street and 24th
Avenue is being converted into 188 condominiums.
A 12-story, 147,000-square-foot office building with possible air
rights at 63 W. 38th St. is on the market for redevelopment as
residential condominiums or a hotel. A few blocks away, a 14-story
office and showroom building at 215 W. 40th St. is being marketed for
$22.5 mil lion as a residential conversion. A zoning variance may be
required.
In May, the City Council approved a zoning plan for Williamsburg and
Greenpoint. Sites there are now selling for more than $175 a
developable square foot. There are two developable Gabila's Knish
Factory properties at 111-113 S. Eighth St. and 110-120 S. Eighth St.
and Bedford Avenue, less than 10 blocks from the subway station at
Hewes Street and Broadway. The sites are under contract for sale, and
were listed for $7.5 million.
At least six other sites in Williamsburg and Greenpoint are on sale
for residential conversion, with prices ranging from $100 to $225 a
developable foot.
A five-story office building at 530-540 Atlantic Ave. in downtown
Brooklyn is being marketed for $18.5 million as a residential
conversion prospect. A 190,000-square-foot development site occupying
the entire block of Myrtle Avenue between Gold and Prince streets,
blocks from MetroTech and the Atlantic Terminal, is being marketed for
$21 million.
A new stadium for the Mets and the Olympics is planned in Flushing.
Muss Development plans a mixed-use complex on the corner of College
Point Boulevard and Roosevelt Avenue on a site formerly occupied by
Con Ed. It will have over 1,200 apartments, a Target, and a Home
Depot. Shaya Boymelgreen is converting the former RKO Keith at 129-43
Northern Blvd. into a mixed-use facility that will have 250
condominiums, 25,000 square feet of retail, and a parking garage.
Everyone wants a piece of the real estate market. A prominent
developer told me that a physician friend called him and told him he
wants to join him and become a developer. The developer asked the
physician if he would like him to assist him while he is performing
surgery. Real estate prices have risen to records, and today is not
the time for amateurs to try their luck as developers.
"I am astonished by the lack of differentiation in underwriting
by the financial community when it comes to quality of sponsorship,
capital structure, and location of a development," a vice
president of real estate finance at HSH-Nordbank, James Fitzgerald,
said. "We remain vigilant and cautiously optimistic on select
developments. It is no longer the domain for amateurs."
- by Michael Stohler NEW YORK SUN Real
Estate, p. 12 23 June 2005
DISTRICTS:
The area from 59th Street to 125th Street and Central Park West to
Riverside Park is considered by many to be the quintessential Manhattan
neighbuorhood. Parks, theatres, historic buildings, world famous museums,
fine restaurants and prestigious Uuniversities call the area home.
Naturally, so does an eclectic mix of New Yorkers, ranging from
stroller-pushing house moms and sharp-dressed executives to bespeckled
intellectuals and paint-splattered artists. Economically, these upwardly
mobile residents range from the professional to the prolific. Many are
drawn to the area to be around like-minded New Yorkers who are,
historically, politically and spiritually liberal—yet who harken to the
sensibilities of suburbia. But all who inhabit this vast stretch of
Manhattan would agree that the satisfying jumble of chic spots and local
haunts, glamorous concert halls and humble community forums—the
irresistible fusion of town and country—render the Upper West Side its
own little Big Apple.
Residents aren’t the only ones clamoring for a bite of this locality.
Big corporations have caught on to its appeal, too. AOL Time Warner, for
example, has built its headquarters at Columbus Circle. Just a stone’s
throw away is the impossible-to-overlook Trump International Hotel and
Towers, home to the rich, famous and delicious (four-star restaurant Jean
Georges is located in the lobby). Trump is also responsible for Riverside
South, another condominium high rise at 70th Street and Riverside Drive,
and the loft condominiums across from Lincoln Center at 43 West 64th
Street, formerly the Liberty Warehouse, promise to attract even more
people to the area. But flashy skyscrapers are nothing new to this part of
town. When Central Park saw its final days of construction, the real
estate to its west saw its beginning. Some of the more notable addresses
are The Dakota at 72nd Street and San Remo Apartments at 74th Street,
exclusive buildings that have seen their share of celebrity residents.
With generations of high profile tenants putting down roots on the Upper
West Side, it’s no wonder rents and real estate values continue to soar.
Still, it’s easy to justify when you consider the benefits of the
vicinity: Lincoln Center, Central and Riverside Parks, the American Museum
of Natural History, Columbia University, Zabar’s, Riverside Church,
Sony’s I-Max Theater, Grant’s Tomb and of course, the newly expanded
72nd Street Subway Station. Best of all, within one wonderful section of
town there exists a number of distinct communities, each boasting unique
character and neighbourhood charm.
Though visitors to New York often think Times Square captures
Manhattan’s raw energy, people who actually live here know that Downtown
is where it’s at! Many of the city’s best restaurants, lounges, dance
clubs and clothing stores are located below 14th Street. Add to that a
huge number of art galleries, city landmarks, cultural institutions and
breathtaking vistas, and it’s easy to see why people scramble to live
here. Not surprisingly, the area is expensive, and with the sprawl of
gentrification now leaking over into the near reaches of Brooklyn, it’s
safe to say everyone knows the value of a downtown zip code.
Still, this section of Manhattan remains ethnically diverse and socially
tolerant, even if the gentrifying trend of Soho and Tribeca is slowly
spreading to other neighborhoods. Parts of the Lower East Side, for
example, continue to hum to the sounds of Latin music and Spanish
conversation, but college kids, artists, musicians and numerous nightspots
have turned this historically Puerto Rican neighborhood into prime real
estate for those whose tastes and finances run between the East Village
and Soho. Significantly less gentrified (but certainly not immune) is
Chinatown, an awe-inspiring neighborhood rife with dim-sum restaurants,
Asian produce and seafood markets, designer knock-offs and more Chinese
immigrants than anywhere else outside of Asia. It’s truly phenomenal!
Especially when you consider that Canal Street once stood as a boundary,
of sorts, between Chinatown and the incredibly shrinking Little Italy.
Nevertheless, these two extraordinarily different cultures live side by
side, retaining (to some degree, in the case of Little Italy) their
old-world essence and unique character.
Other neighborhoods below 14th Street possess a different kind of
personality. Greenwich Village, popular in the 1960’s with visionaries
such as Alan Ginsberg and Jack Kerouac, is less bohemian these days, now
that students from nearby NYU have christened the area their personal
cocktail lounge. Bar after bar line the leafy blocks along Bleecker
Street, with plenty of restaurants, novelty shops and cramped cafes thrown
in for good measure. Even so, there are countless reasons (Washington
Square Park, Salmagundi Club, Jefferson Market Library, Babbo!) why buyers
pay top dollar for the area’s quaint, townhouse apartments.
The crowds diminish as you move toward the Hudson or East Rivers, but
unfortunately, property values don’t—particularly in the West Village.
New buildings, like Richard Meier’s tower at 173-176 Perry Street, house
a number of high profile personalities. Horatio House and The Greenwich
are a couple of other luxury buildings to go up in recent months. Needless
to say, this is one area of Manhattan where supply will probably never
outpace demand.
Over to the east, cute cafes and college book stores give way to
body-piercing palaces, tattoo parlors, second-hand clothing stores and all
things punk rock. But don’t let the East Village fool you. Like every
other neighborhood in Manhattan, its edges have been softened by the “A,B,C’s”:
Artists, business and college students. What was once a playground for
immigrants, poets, vagabonds, and musicians has become a hotbed of slacker
sophistication, thanks to the large number of graduate students and young
professionals who have taken over the area. And alphabet city, long-known
for its large Spanish population and sketchy sidewalks, is looking more
and more like the rest of the streets to the west of Tompkins Square Park.
Neighborhoods currently undergoing the “it” phenomenon include Nolita
(hipster headquarters), Tribeca (cinemaphile central) and the Meatpacking
District (style station), all of which are seeing their share of swanky
boutiques, sceney lounges and restaurants of the chic variety. It’s hard
to say which pockets below 14th Street will boom next—mainly because
there’s nothing left to emerge—but New Yorkers and all who wish to be
New Yorkers have a way of sussing out life in the most unexpected places.
When people think of Midtown, most probably conjure images of Times
Square’s bright lights, soaring buildings, famous venues, taxi-clogged
streets and world-class hotels. But this section of Manhattan isn’t
nearly that one-dimensional. Midtown covers a vast stretch of land,
roughly from 14th to 59th Streets, between the Hudson and East Rivers. As
anyone who has wandered these blocks knows, that covers a lot of
personality.
No two neighborhoods within the Midtown bubble are alike. The area of
Chelsea, known for its white-hot galleries, fierce nightlife and pre-war
co-ops, is vastly different from Gramercy Park, with its manicured
streets, refined restaurants and ornate townhouses. As to be expected, the
residents in these areas are also quite different from one another, but in
the end, they all complete one large picture of diversity. And that’s
the key to understanding—and embracing—Midtown. An area that can boast
varied landmarks such as Rockefeller Center, Grand Central Station, the
Four Seasons, the Empire State Building, the Javits Center, Macy’s and
Madison Square Garden among other sights, must appeal to myriad
individuals. These residents have seen to it that their Midtown nooks
generate some of the best theater (Broadway/Theater District), the latest
fashion (Fashion District), the finest restaurants (Gramercy/Flat Iron)
and the most notable hospital facilities in the world (Murray Hill/Kips
Bay).
Beyond its cultural benefits, Midtown Manhattan has a logistical allure
for many residents. Most neighborhoods are well serviced by subway and bus
lines and, if they’re not, they’re usually traversed by a stream of
yellow cabs. This means that Central Park and Uptown museums are just as
accessible as Battery Park and Soho Shopping. But when you think about it,
who really needs Uptown or Downtown, when all you could ever want is
thriving within this wonderful stretch of real estate?
- Douglas Elliman
Condo-Maximum
- Prices Way Up for Manhattan Apts
The New York Post
July 13,
2004
Nothing can slow down the soaring market for Manhattan apartments - not
even the soaring interest rates.
Leading the way, by a large margin, is the condo market, which posted a
remarkable 60 percent increase for East Side condos, with an average sale
price of $1.4 million.
The average price for condos around the borough jumped 38 percent - and
Manhattan co-ops went up 19 percent, according to a report released by the
Corcoran Group real-estate firm.
Co-op studios around Manhattan jumped 20 percent to an average $277,000
and a typical condo studio will set you back $396,000. "Just to live in one room . . . will cost you just under
$400,000," said Corcoran CEO.
"And that doesn't even mean you'll get a view out that one
window."
People who could afford apartments with lots of bedrooms were in a
"buying frenzy" the report said.
Condos with three or more bedrooms sold for an average of close to $3
million - a 32 percent hike from the first half of 2003.
Co-ops with three or more bedrooms went for an average of $2.5 million
- an 8 percent increase.
Co-ops generally sell for less than condos because of the hassles of
getting approved by persnickety boards and have to give up highly personal
financial and other information.
Townhouses, once considered undesirable and expensive to maintain, are
now practically worth their weight in gold.
"Buying a townhouse on the Upper East Side is going to cost an
average $5.8 million." That's an increase of 23
percent over last year.
West Side townhouses posted a 17 percent gain in the last six months to
$2.41 million.
Corcoran says the superheated market is being propelled by "record
Wall Street earnings."
In another report, Jeffrey Jackson, the chief economist for appraisal
firm Mitchell, Maxwell & Jackson, said, "At the current rate,
within five years [no Manhattan apartment or condo] will go for under a
half a million dollars."
According to MMJ, the increase in the 30-year fixed mortgage rate from
5.74 percent to 6.26 percent did nothing to affect sales.
The Corcoran report also showed that Brooklyn sales and prices continue
to surge.
In the first half of 2004, the average price of all residences went up
16 percent. Sales of single-family homes were up 18 percent over the same
period last year.
Sales were especially good in Fort Greene and Boerum Hill, where prices
increased 30 percent from a year ago.
One of the fastest growing Brooklyn neighborhoods is DUMBO, where the
average price of condos jumped a startling 42 percent to $1.1 million.
-
by Braden Kiel NEW YORK POST
13 July 2004
Real-estate prices remain high in first half of 2004:
Manhattan - average sale prices:
-
Condos $1.23 million Up 38%
-
Co-ops $900,000 Up 19%
-
East Side condos $1.406 million Up 60%
-
West Side condos $1.282 million Up 42%
-
East Side townhouses $5.8 million Up 23%
-
West Side townhouses $2.41 million Up 17%
-
Studio condos $396,000 Up 11%
-
Studio co-ops $277,000 Up 20%
-
Three-plus bedroom condos $3 million Up 32%
-
Three-plus bedroom co-ops $2.5 million Up 8%
-
Brooklyn - average sale prices
-
Marketwide Up 16%
-
Single-family homes $1.5 million Up 18%
-
Boerum Hill and Fort Greene areas Up 30%
Source: Corcoran Group
July 13, 2004
Sales of luxury residential properties continued to
hold steady on the Upper East Side and Upper West Side after a slight
decrease in 2002 prices. Fifty-one cooperative apartments were
closed in the over $4 million range in the first half of 2002, in contrast
to 44 in the first half of the peak market in 2000.
-
The cooperative market has held its own in the
$4 to $10 million range although there was a decrease in the average
sale price in 2002.
-
Cooperatives of over $10 million had the
greatest price decrease -- some by 20% to 30% -- due to the absence of
the global buyer. Nevertheless there was a resurgence in the $10
million-plus market with seven accepted offers in the last quarter of
2002 and into 2003.
-
Townhouses were the strongest sector with total
volume soaring 45% to $282,837,400. Thirteen townhouses were sold in the
first quarter of 2002 in the $10 million range, three more than in 2001
and the market seems to be holding steady in 2003.
-
The condominium market, similar to the
cooperative market, has seen brisk sales in the under $10 million range,
while the $10 million market languished until the last half of the year.
At least eight condominiums in the $10 million to $18.5 million range
were sold in 2002, six sales occurring in the last half of the year.
-
Downtown townhouse sales and condominium
resales lagged in 2002 with much competition from new projects but seem
to be rebounding now. - Stribling
1 April 2003
Condo
in Midtown
325 Fifth Ave.
A $37.4-million bridge loan
closed for 325 Fifth Ave., a 250-unit, 390,000-sf residential
condominium project with an estimated development cost of $190
million.
Richard Bassuk, president
of the Singer and Bassuk Organization, tells GlobeSt.com that the
developers--a joint venture between Continental Properties, owned by
the Fisch family, and Jeffrey Levine’s Douglaston Development--feel
this project will “change the face of this Midtown area.” The site
is between 32nd and 33rd streets. Work will begin shortly and the
building is expected to be completed some time in early 2006.
“This should really
stimulate development in this area,” says Bassuk, who has
long-established relationships with both JV partners. In fact, he
introduced them. He says the 40-story tower in the shadow of the
Empire State Building is at the intersection of a number of
Manhattan's prominent neighborhoods: Chelsea, Grammercy and and the
Flatiron District. "It will really change the character of the
neigborhood."
HSBC Bank provided the
bridge loan to facilitate the acquisition and start of development.
“The substantial interest shown by HSBC is testimony to the project
and its owners," Bassuk points out. Levine says Bassuk was
“instrumental in obtaining the bridge loan we required to acquire
the property and related development rights on highly advantageous
terms.” Steven Fisch says it took SBO's "special expertise in
coordinating the financing of a project with its development and
construction requirements.”
SBO has obtained a
$130-million construction loan and a $42-million mezzanine loan for
the project. The 325 Fifth Ave. bridge loan transaction is the latest
bridge-loan financing arranged recently for SBO clients. Recent SBO
bridge loans have totaled more than $250 million in seven
transactions. - by Barbara Jarvie
GLOBE
ST
9 Sept 2004
OFFICE
Vacancy
rate up for top Manhattan buildings
Manhattan's strongest and weakest office
markets flipped direction in July, as the vacancy rate for top-quality
Midtown buildings shot up while a similar rate Downtown fell,
according a monthly report from Colliers ABR. The spike in Midtown's
Class A vacancy rate - to 9.3 per cent from 8.8 per cent - was blamed
on two large blocks of space totalling about 891,000 square feet
coming onto the market in the Grand Central area.
Those two spaces seeking tenants brought the
vacancy rate for Class A buildings - those that are new or renovated
with up-to-date amenities - in the Grand Central area to 11.8 per
cent, the highest rate since December 2003 and up from 9.2 per cent in
June.
Average asking rents for Midtown Class A
buildings dropped for the second month in a row, to US$60.26 per
square foot from US$60.57 per square foot in June.
'I honestly don't think this is very serious
for a couple of reasons,' Robert Sammons, director of research, told
Reuters. 'Citigroup is very close to inking a deal at 485 Lexington,
which will help decrease this number.
'It certainly will be going up the next few
months,' he said. 'This is typically a time when many brokers are on
vacation. Not a lot of wheeling and dealing gets done in the
summertime in New York.'
Meanwhile, the vacancy rate for Downtown
Class A buildings fell to 11.3 per cent in July from 12 per cent in
June. However, that trend may not last, as the 1.7 million square feet
of space at the newly constructed 7 World Trade Center comes on the
market at the end of the year.
Rents for Downtown Class A buildings rose to
US$33.97 in July from US$33.92 in June. -
Reuters 11 August 2005
NOTABLE
TRANSACTIONS:
$355M
Price Tag for 180 Maiden Lane
Investor Joseph Moinian made a big move into Class-A office land with an
approximately $355 million purchase of 180 Maiden Lane, also known as
Continental Center.
The somewhat octagonal, 1.09 million-square-foot building, located on
the East River waterfront, is nearly fully leased to Goldman Sachs and
the law firm Stroock, Stroock & Lavan.
Real Estate Finance & Investment reported that the German-funded
Paramount Group is selling the building to a Moinian-led investor group
for about $323 a foot.
Paramount bought it from CNA Financial for $290 million, or $263 a foot,
in early 2001.
Wayne Maggin of Eastdil is marketing the property, but neither he nor
Moinian returned calls for comment.
Moinian developed the residential Marc, at 800 Eighth Ave. This year
alone he (with partners) has bought 530 Fifth Ave. and 1450 Broadway; he
is in contract for 95 Wall St.
He is also part of the New York investor group that purchased the Sears
Tower in Chicago. - by Lois Weiss NEW
YORK POST 9 July 2004
Donald
Trump and his Japanese investors sold the Empire State Building to master leaseholder Peter
Malkin for $57.5 million
Max Capital Management Corp. acquired a five million square foot class A office portfolio from
Credit Suisse First Boston, including two Manhattan office towers as
well major properties in Chicago and Detroit for $777 million.
The New York additions to Max Capital’s
7 million square foot holdings include 350 Madison Ave. and 1440
Broadway, both of which the firm currently owns in partnership with
CSFB. Other trophy properties in the portfolio include One North
LaSalle in Chicago, a 49-story landmark office tower, and 150 W.
Jefferson in Detroit, a 25-story, glass-and- steel office tower.
1515
Broadway sale
- first significant sale since 9-11 to Canada's
Caisse Depot
The 40 storey office tower
at 450 Lexington Ave., sold to Beverly Hills oil baron Marvin Davis, according to
published reports in November 2001. Owned by Royal Dutch/Shell
Group's Pension Fund, Eastdil Realty is arranging what is said to be
a sale in the neighborhood of $325 million for the building, which
is located at Lexington Avenue and 45th Street, immediately north of
Grand Central Station's Graybar building. The facility has 900,000
square foot of office space sitting atop a United States Postal
Service Office facility.
Lehman
Brothers Holdings Inc. purchased the one million square foot tower
that Morgan Stanley has been building in New York City at Broadway
and 49th Street. Located a stone's throw from Morgan Stanley's 1.4
million square foot Times Square headquarters at 1585 Broadway, the
new building, 745 Seventh Ave., has been under construction since
1999 and is scheduled for occupancy later this year. The firm
recently leased Manhattan office space on Third Avenue and Morgan
Stanley states it will continue to accumulate additional space at
750 Seventh Ave., 1633 Broadway, Pierrepont Plaza in Brooklyn and in
retail branches throughout the city.
The class B office building at 469 7th Ave fetched
$222 per sf for the seller, a JV of SL Green and MSREF when it sold
for $53 million. The deal was considered an indicator of renewed
interest in bread-and-butter assets with solid long-term potential.
The New York office market
was hugely affected by the events of WTC on 11 September 2001.
The total immediate loss is roughly 15 million sq. ft. of property
in lower Manhattan (approximately 12.7 million square feet was
destroyed and another 2.3million square feet has been damaged or
declared structurally unsound as a result of fires, falling debris
and building collapses. More than 10.7 million
sq. ft. of property sustained damage (5 million sq. ft. that will be
taken out of the market for at least one year to complete extensive
repairs and reconstruction and 5.7 million square feet that should
be ready for occupancy in less than 12 months)
Rockefeller
Centre
sold to Chicago billionaire Lester Crown family with NY's
Speyer for $1.85 billion for the 22-acre complex comprising 12
historic Rockefeller Center buildings. Vacancy in the complex
was just 1%.
One of the office
towers of Rockefeller Centre in midtown Manhattan at 1211 Avenue of
the Americas was acquired by a German group for $561 million. The 45 storey Class A office building comprising 1.9 million square
foot was built in 1973 by the Rockefeller group. The vacancy for Class A office space in the area known commonly as the
Plaza District was 1.84 per cent, down from 4.16 percent at the same
time last year. The purchaser already owns 620 Avenue of the
Americas and 1475 Broadway.
German real estate developer RFR
acquired the 38th storey Seagram Building at 52nd Street and Park
Avenue from Teachers Insurance and Annuity for $375 million
for the 42 year old property.
Houston
based Hines acquired the 36 storey, 592,000 sq ft office tower at 750
Seventh Avenue in partnership with General Motors Asset
Management. The building completed in 1990 is 100% tenanted
and anchored by Morgan Stanley Dean Whitter who occupy approximately
60 per cent of the building.
Bids were accepted for the 1.47
million sq ft, 42 storey building on the western side of Sixth
Avenue between West 51st and 52nd Street. Paine Webber Group
occupies approximately one-third of the property where rents average
~ $65 per sq ft.
AT&T
Corp sold its Manhattan based headquarter building to members of
prominent New York real estate family for ~ $150 million. Plans for the 85 year old property at 32 Avenue of the Americas,
include technological upgrades, as well as traditional renovation.
While AT&T plan to maintain a significant presence in the
building, an AT&T spokesman said the company no longer wanted to
be in the real estate business.
Vornado
Trust who owns the former Alexander's site between 58th and 59th
streets and Third and Lexington avenues has plans for a
redevelopment which includes stores on the first two floors, office
on three floors, 20 floors of hotel suites and 47 floors of luxury
condo. Vornado who have owned the site for 20 years have been
in talks with Bloomberg, the financial services company, about a
deal for the office space and has signed Swedish retailer H&M as
tenant. Apparently
number of tenants are rumored to have signed.
Reckson Associates
Realty purchased the 35 storey, 540,000 square feet Class A office
tower in Manhattan at 1350 Avenue of the Americas for $126 million.
The property, 1350 Avenue of the Americas, is located midtown, at
the corner of 55th Street in the Sixth Avenue/Rockefeller Centre sub
market. This is Reckson's second acquisition in
New York City since its May merger with Tower Realty Trust. The group now has more than 3.5 million square feet of Class-A
office space in the city. Reckson also purchased 919
Third Avenue.
The Government
of Singapore Investment Corp. backed out of a preliminary
agreement to buy 1211 Sixth Avenue for about $570 million from
Heitman Financial earlier in 2001. The seller is in discussion
with finalists in the bidding to buy the 1.9 million square foot
trophy tower between West 47th And West 48th Streets. GSIC
emerged from a pack of a dozen bidders tot make the preliminary
agreement for $300 per square foot.
Chinese firm eyes big
site for NY center
One of China's largest real estate companies
is seeking up to 1 million square feet of office space in Manhattan to
create a center for Chinese companies establishing operations in the
United States.
Beijing Ventone Real Estate gave formal
approval earlier this month to seek suitable office space in the city,
according to New York businesspeople who have been working with the
company. It would lease the space, and then sublease offices to Chinese
companies that want a headquarters in the West. Ventone would provide
those companies with support services such as conference facilities and
translators.
Ventone is considering both midtown and
downtown for the new venture, but city leaders are pushing hard for a
downtown location.
"We are hopeful that they'll go to 7
World Trade Center," says Kathryn Wylde, president of the
Partnership for New York City. A meager 20,000 square feet of the 1.7
million-square-foot World Trade Center tower is leased, not including an
office for the developer and World Trade Center leaseholder, Larry
Silverstein.
City officials agree that a downtown location
is best. The plan "dovetails nicely with what we are trying to
accomplish downtown," says Josh Sirefman, assistant to Deputy Mayor
Daniel Doctoroff. "Ventone's preference is for lower Manhattan,
from what I understand." A number of Chinese companies were located
at the original World Trade Center.
Still, space abounds in midtown, which could
pose competition for the site. Blocks include 1 million square feet at
the Bank of America tower at 1 Bryant Park and 700,000 square feet up
for grabs at The New York Times Building at West 41st Street and Eighth
Avenue. But because it lacks the incentives available downtown and has
higher rents, midtown would be far more expensive.
New government policy
Ventone could not be reached, and its broker, Peter Riguardi of Jones
Lang LaSalle, didn't return calls for comment.
Last fall, China decided to encourage Chinese
businesses to invest overseas. The most recent indication of the impact
of this is Chinese computer giant Lenovo's acquisition of IBM Corp.'s
personal computer division for $1.75 billion. Lenovo has since opened an
office in New York.
68 Chinese firms in New York
According to Laura Aubuchon, a senior vice president at the city's
Economic Development Corp., 68 China-based firms have offices in New
York. Of China's 32 largest companies--with $500 million or more in
annual sales revenue--13 have a presence in the city.
The Chinese government has agreed to allow
Ventone to create an off-shore company, but the plan to establish a
business center is still wending its way through the complicated
governmental approval process, Ms. Wylde says.
One of China's largest private developers,
Ventone earned $108 million last year. One of its most recent
developments is the $300 million "Central Park" in Beijing. It
boasts 1,800 residential units and 2,000 parking spaces within the 1
million-square-foot project. - by Julie Satow
CRAIN'S
NEW YORK 29 August
NOTABLE LEASE
TRANSACTIONS
OFFICE
- The National Association
of Securities Dealers, parent of the Nasdaq and the American Stock
Exchange, decided to relocate its headquarters to New York from
Washington DC. NASD committed
to lease approximately 200,000 sq ft at 1 Liberty Plaza, and renovate 86
Trinity Place, where the American Stock Exchange Building is located.
A Brookfield Properties partnership own the 2.1 million sq ft
tower,1 Liberty Plaza which is across from the World Trade Center.
- Goldman Sachs signed a 15 -year
deal for 261,000 sq ft at 1 Liberty Plaza to accommodate future
expansion and maintain its downtown stronghold. Asking rate on the space was $45 sq ft
- Time-Warner Entertainment LLP signed a 20-year lease in Manhattan valued at $250 million for its Home
Box Office division. The lease was for 350,000 square feet of space
at 1100 Avenue of the Americas, where HBO has been headquartered since
1984, and 243,000 square feet of additional space in the adjacent
building at 1114
Avenue of the Americas. Neighboring tenants in the area include Viacom, Conde Nast,
Bertelsmann and Reuters.
- Arthur Andersen signed a lease
with Boston Properties that enables the developer to build a $600
million skyscraper at the southern end of Time Square - the last in a
quartet of office towers in the area. The accounting firm will
take > 500,000 sq ft in a 1.2 million sq ft, 47 storey building. The
existing office building and Times Square Brewery will be razed to
accommodate the development.
RETAIL
Manhattan retail rents up 26 percent
Retail rents in Manhattan average $133 per square foot, up 26 percent from $106 per square foot last year, according to a Real Estate Board of
New York report. The average annual rent for a 1,000 square-foot business is $133,000. Downtown, average rents have eclipsed $100 for the first
time, increasing 18 percent this year to $109 per square foot. The biggest spike was on Broadway in the Times Square area, where ground-floor rents
surged 107 percent to an average $797 per square foot. Rents average $1,108 on Madison Avenue and $1,250 on Fifth Avenue.
2007 December 14
- Fifth
Avenue and Broadway Rents skyrocketing
- Flatiron Building Retail sets new
standards
A division of Estee Lauder set new real estate records for the lease
at Fifth Avenue and East 22nd Street. The Deal @
Flatiron:
Who:
Estee Lauder Co's.
Where: The Flatiron Building
How big: 4,000 sq ft plus signage and exterior design
Rent: $210 per sq ft
Lease: 15 years
- Giorgio Armani Corp. signed a
lease for a 5,500-square-foot, two level retail space at 410
West Broadway at Spring Street in Soho for its Emporio Armani store
- Upper East side - Zale Corp, US'
largest jewelry retailers, signed a 15 year lease for 3,000 sq ft retail at the northeast corner of East 69th at
1187 Third Avenue. The asking rate was $175 per sq ft
HOTEL
INVESTMENTS
- Carlyle Hotel sold
For close to the same
price per room paid for the Four Season's hotel the Upper East Side landmark
was sold to Rosewood Hotels.
- Donald Trump outflanked three
eager bidders to walk away with the keys to one of New York City's
most sought-after prizes, the Hotel Delmonico, post 9-11. The
developer paid $115 million for his latest trophy, proving that the
market for icon properties is not only alive, but also kicking like
a Rockette. Located on the northwest corner of Park Avenue and 59th
Street, the Delmonico was owned by local real estate legend Sarah
Korein until her death three years ago. The hotel is controlled by
her estate and has been run by her daughter, managing partner
Elysabeth Kleinhans.
-
Millennium
Partners broke ground on its Ritz-Carlton Hotel & Residences in
downtown Manhattan's Battery City Park. The $205 million mixed-use
complex will consist of the first five-star hotel in lower Manhattan,
luxury condominiums, restaurants, and a spa. The property will
also be home to the Skyscraper Museum. The property is one of six partnerships between Millennium Partners and
The Ritz-Carlton Hotel and a component of an $800 million Ritz-Carlton
development program. The companies are involved in two projects in
Boston, as well as one in Washington DC.
>> more HOTEL
NEWS
NYC
RESIDENTIAL
Prior to the events of WTC, after the Tech stock
market collapse, the $1.5 million and lower
apartment range, the market was still holding. Damage especially
strong in the $1.5 to $5 million range.
- Manhattan residential
jumped 42% from year earlier according
to a report released by residential broker Douglas Elliman, the average
price of Manhattan co-ops and condos was $854,704 in the three months
ended June 30, up from $601,180 in 1999.
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