N.Y. rents plummeting
COMMERCIAL REAL ESTATE VACANCIES RISING AS MANHATTAN BUSINESSES FOLD
By Maureen Fan
Mercury News New York Bureau

NEW YORK - Cinda Lawrence, an administrative assistant for a coat maker in the Empire State Building, loves the skyscraper's historic character and discounts post-Sept. 11 jitters.

``You can't just dwell on the negative,'' the 14th-floor office worker said. But colleagues on higher floors in what's now Manhattan's tallest skyscraper are getting out fast, tripling the building's vacancy rate to 15 percent since the Sept. 11 attacks.

All around town, commercial rents for prime office space have plummeted -- by as much as 50 percent in some high-profile buildings. Newspaper ads are going unanswered, landlords are offering more incentives and tenants are getting calls from brokers encouraging them to look for better deals elsewhere.

``The market definitely has softened. The tenants are definitely in the driver's seat, negotiating deals,'' said Tim Kulcha, senior director at Plymouth Partners, a local tenant brokerage. ``That wasn't true a year ago.''

Twelve months ago, Manhattan's real estate market rivaled Silicon Valley's for its cutthroat tactics and stratospheric rates. Landlords would demand two years' security deposit, require tenants to build out the space themselves and give them a month to get the job done, said Stephen Sunderland, managing director of IGDNYC, another Manhattan firm that represents commercial tenants. Now, landlords are offering free rent, construction time and contributing to the cost of the work.

``I just closed a deal in the Flatiron district, $20 a square foot with the space fully renovated, with air conditioning and ducting, five months free rent and a view,'' Sunderland said. ``A year ago, it was $40 a square foot, as is.''

The Trade Center attacks are the foremost culprit in many people's minds. Downtown lost hundreds of companies and more than 100,000 jobs. Half of the 45 nearby buildings that were burned, punctured, flooded or otherwise damaged that day remain closed.

But the truth is the commercial real estate market here was shaky well before Sept. 11, with Manhattan vacancy rates more than doubling to 10.9 percent by Sept. 10, 2001, from 5.1 percent in 2000, according to Plymouth Partners.

Mostly, the weak economy is to blame. But the dot-com bust, declining advertising revenue, Wall Street layoffs and the Trade Center attacks all played starring roles in the shakeout of 2001.

``Last year, there was still activity and tenant demand, but it just wasn't at the same pace as 2000. It was almost a slow and steady progression toward inactivity,'' said Kenneth Krasnow, senior managing director at Cushman & Wakefield, the second-largest U.S. commercial real estate broker. ``Then we felt 9/11.''

Attacks' aftermath

After the attacks, people wrongly assumed that about 50,000 workers would immediately need new office space. Based on available market figures at the time, some expected the city's already low vacancy rate would drop to zero.

But downtown companies went out of business, moved to existing, unadvertised empty space or fled the city altogether. Wall Street continued to shed jobs. Many companies took a wait-and-see attitude, and opted for short-term leases. Others reduced their risk by spreading out their operations onto other power grids and telephone circuits throughout the region.

At the same time, companies quietly hanging onto excess space dumped unwanted square footage onto the market.

``What we actually had was a rise in the vacancy rates after Sept. 11, fueled by the sublease market,'' Krasnow said. ``There was a tremendous amount of excess capacity that corporate America took on in 1999, 2000 for anticipated growth or fear of being locked out of future sales or growth.''

From 16 million square feet of availability before the attacks, more than 21 million square feet of Class A office space is available now.

Some financial services firms have moved into former dot-com space. Bank of New York has moved into space formerly leased by Starmedia, and investment bank Zurich Re took over a 95,000-square-foot office that used to belong to efinanceworks, Kulcha said.

But for the most part, the fringe neighborhoods and buildings sought out by many high-tech companies do not offer Class A amenities such as janitorial services, doormen, high-speed elevators and posh addresses.

Prices for prime office space, even while in oversupply, remain higher than they were five years ago. Subleases in Class A buildings in midtown can be rented for $40 to $65 per square foot. Similar space can be found in trendy downtown neighborhoods such as the Flatiron, Tribeca and SoHo for $17 to $30 a square foot.

The residential market also seems to be holding up, with low interest rates and a short supply working to keep prices relatively high.

The gloomy forecast for commercial real estate here echoes similar conditions in the Bay Area, Seattle and Boston, where a vacancy rate of 11.7 percent in December is up from 4.7 percent the previous December.

Boston's suburbs are doing even worse. The region's availability rate was 17.7 percent of all office space, up from 5.7 percent a year earlier, according to Spaulding & Slye Colliers International.

In New York, the Trade Center attacks simply aggravated a climbing vacancy rate. As it turns out, the impact of the attacks on the real estate market was not so much the loss of office space, but the shattering of the city's confidence, some brokers said.

``People are not looking to be in high-profile buildings right now,'' said Kulcha, who had a tenant on a high floor in a high-profile building he declined to name who was trying to get out of his lease and move to a lower-profile location.

``I have a sublease on the 74th floor of the Empire State Building. I think I've only received one phone call in two months, despite having ads in the paper,'' Sunderland said.

But John DiBari, chief executive officer of Datacom Technology Group, is happy with his 6,000 square feet on the 38th floor of the Empire State Building, where solid beams and 1930s construction have made the floor plans more suitable for smaller to medium-size tenants.

Some staying put

``I must get about 10 calls a day from real estate agents suggesting we break our lease,'' said DiBari, who runs an IT consulting and software company. ``But this is a great place to be. Penn Station is a block away. Grand Central is a couple of minutes away.''

Security has been beefed up in the building, an initially cumbersome but reassuring move, he said.

``People were concerned at first, because of the fact it's now the most recognizable and tallest building,'' DiBari said. ``But time has passed, we would not consider leaving and they're doing a great job with the security.''



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Kann jemand das Wesentliche in dt. Sprache wiedergeben?? Danke!!!!
>N.Y. rents plummeting
>COMMERCIAL REAL ESTATE VACANCIES RISING AS MANHATTAN BUSINESSES FOLD
>By Maureen Fan
>Mercury News New York Bureau
>NEW YORK - Cinda Lawrence, an administrative assistant for a coat maker in the Empire State Building, loves the skyscraper's historic character and discounts post-Sept. 11 jitters.
>``You can't just dwell on the negative,'' the 14th-floor office worker said. But colleagues on higher floors in what's now Manhattan's tallest skyscraper are getting out fast, tripling the building's vacancy rate to 15 percent since the Sept. 11 attacks.
>All around town, commercial rents for prime office space have plummeted -- by as much as 50 percent in some high-profile buildings. Newspaper ads are going unanswered, landlords are offering more incentives and tenants are getting calls from brokers encouraging them to look for better deals elsewhere.
>``The market definitely has softened. The tenants are definitely in the driver's seat, negotiating deals,'' said Tim Kulcha, senior director at Plymouth Partners, a local tenant brokerage. ``That wasn't true a year ago.''
>Twelve months ago, Manhattan's real estate market rivaled Silicon Valley's for its cutthroat tactics and stratospheric rates. Landlords would demand two years' security deposit, require tenants to build out the space themselves and give them a month to get the job done, said Stephen Sunderland, managing director of IGDNYC, another Manhattan firm that represents commercial tenants. Now, landlords are offering free rent, construction time and contributing to the cost of the work.
>``I just closed a deal in the Flatiron district, $20 a square foot with the space fully renovated, with air conditioning and ducting, five months free rent and a view,'' Sunderland said. ``A year ago, it was $40 a square foot, as is.''
>The Trade Center attacks are the foremost culprit in many people's minds. Downtown lost hundreds of companies and more than 100,000 jobs. Half of the 45 nearby buildings that were burned, punctured, flooded or otherwise damaged that day remain closed.
>But the truth is the commercial real estate market here was shaky well before Sept. 11, with Manhattan vacancy rates more than doubling to 10.9 percent by Sept. 10, 2001, from 5.1 percent in 2000, according to Plymouth Partners.
>Mostly, the weak economy is to blame. But the dot-com bust, declining advertising revenue, Wall Street layoffs and the Trade Center attacks all played starring roles in the shakeout of 2001.
>``Last year, there was still activity and tenant demand, but it just wasn't at the same pace as 2000. It was almost a slow and steady progression toward inactivity,'' said Kenneth Krasnow, senior managing director at Cushman & Wakefield, the second-largest U.S. commercial real estate broker. ``Then we felt 9/11.''
>Attacks' aftermath
>After the attacks, people wrongly assumed that about 50,000 workers would immediately need new office space. Based on available market figures at the time, some expected the city's already low vacancy rate would drop to zero.
>But downtown companies went out of business, moved to existing, unadvertised empty space or fled the city altogether. Wall Street continued to shed jobs. Many companies took a wait-and-see attitude, and opted for short-term leases. Others reduced their risk by spreading out their operations onto other power grids and telephone circuits throughout the region.
>At the same time, companies quietly hanging onto excess space dumped unwanted square footage onto the market.
>``What we actually had was a rise in the vacancy rates after Sept. 11, fueled by the sublease market,'' Krasnow said. ``There was a tremendous amount of excess capacity that corporate America took on in 1999, 2000 for anticipated growth or fear of being locked out of future sales or growth.''
>From 16 million square feet of availability before the attacks, more than 21 million square feet of Class A office space is available now.
>Some financial services firms have moved into former dot-com space. Bank of New York has moved into space formerly leased by Starmedia, and investment bank Zurich Re took over a 95,000-square-foot office that used to belong to efinanceworks, Kulcha said.
>But for the most part, the fringe neighborhoods and buildings sought out by many high-tech companies do not offer Class A amenities such as janitorial services, doormen, high-speed elevators and posh addresses.
>Prices for prime office space, even while in oversupply, remain higher than they were five years ago. Subleases in Class A buildings in midtown can be rented for $40 to $65 per square foot. Similar space can be found in trendy downtown neighborhoods such as the Flatiron, Tribeca and SoHo for $17 to $30 a square foot.
>The residential market also seems to be holding up, with low interest rates and a short supply working to keep prices relatively high.
>The gloomy forecast for commercial real estate here echoes similar conditions in the Bay Area, Seattle and Boston, where a vacancy rate of 11.7 percent in December is up from 4.7 percent the previous December.
>Boston's suburbs are doing even worse. The region's availability rate was 17.7 percent of all office space, up from 5.7 percent a year earlier, according to Spaulding & Slye Colliers International.
>In New York, the Trade Center attacks simply aggravated a climbing vacancy rate. As it turns out, the impact of the attacks on the real estate market was not so much the loss of office space, but the shattering of the city's confidence, some brokers said.
>``People are not looking to be in high-profile buildings right now,'' said Kulcha, who had a tenant on a high floor in a high-profile building he declined to name who was trying to get out of his lease and move to a lower-profile location.
>``I have a sublease on the 74th floor of the Empire State Building. I think I've only received one phone call in two months, despite having ads in the paper,'' Sunderland said.
>But John DiBari, chief executive officer of Datacom Technology Group, is happy with his 6,000 square feet on the 38th floor of the Empire State Building, where solid beams and 1930s construction have made the floor plans more suitable for smaller to medium-size tenants.
>Some staying put
>``I must get about 10 calls a day from real estate agents suggesting we break our lease,'' said DiBari, who runs an IT consulting and software company. ``But this is a great place to be. Penn Station is a block away. Grand Central is a couple of minutes away.''
>Security has been beefed up in the building, an initially cumbersome but reassuring move, he said.
>``People were concerned at first, because of the fact it's now the most recognizable and tallest building,'' DiBari said. ``But time has passed, we would not consider leaving and they're doing a great job with the security.''


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