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August 2008

August 2008 » Market Analysis » NY New Developments

August 2008 New York New Developments

New Developments

Office availability rises along with asking rents. Manhattan commercial rents increased in the year's first half even as the available for leasing increased. Average asking rents increased to $71.35 per square foot in June up from $63.46 per square foot in June, 2007. Despite an increase in leasing activity in the second quarter, the total for the first half of the year was 10.47 million square feet, a decline of about 1.5 million square feet from the same period in 2007.

Some commercial landlords are raising the rents higher than ever before. L&L Holding Company is asking for a rent of $85 per square foot at 200 Fifth Avenue, a 400,000-square-foot former International Toy Center office building. Overall, the market is comparing well in comparison to 2001. But with concessions like free rent and remodeling, the market begins to look bleaker. As giants like Lehman Brothers and Citigroup look to offload some of their holdings, millions of square feet at prestigious addresses are hitting the market.

U.S. Businesses around the country are taking less office space, driving rents down and giving tenants the upper hand. Office rents, including landlord concessions, rose .7 percent in the second quarter to $25.16 per square foot, the slowest growth since the second quarter of 2005. Businesses vacated more office than they took for the second straight quarter. The national vacancy rate increased to 13 percent, up from 12.8 percent last quarter. New York City's rent growth slowed to .7 percent in the second quarter.

Commercial real estate is suffering right along with the residential market, for different reasons. U.S. lenders are far more cautious with financing and it's affecting the number of deals. With the exception of the Macklowe Properties, comparatively few U.S. firms have managed to pull off big sales this year.

Developers are eying two blocks in Chinatown now that the city council has approved the re-zoning of the area between Walker and White streets, Broadway and Lafayette Street. The two blocks have been changed from a manufacturing zone to a commercial zone allowing commercial, residential, retail and community facility uses, following the council's approval.

Before Mayor Bloomberg leaves office, the city Landmark Preservation Commission could designate another 1,000 buildings as landmarks. New historic districts under consideration are in Prospect Heights and Bedford-Stuyvesant in Brooklyn and Ridgewood in Queens. Last month, an industrial neighborhood in West Chelsea was chosen.

Extell Development is negotiating with Costco regarding underground retail at its new 3.3 million-square-foot Upper West Side development.

Despite being over-budget and delayed, construction at the World Trade Center site continues. White arches are underground, marking a passage that will connect WTC PATH station to the World Financial Center. The bathtub for Towers 3 and 4 are filled with developer Larry Silverstein's construction equipment. The site shows progress at Tower 3, but not much at Tower 4.

New York City's gross city product increased by 0.8 percent in the first quarter, slower than the 1 percent growth in the nation's GDP. In last year's last quarter, the city's output rose 1.4 percent, while the nations increased just 0.6 percent.

New York City fell seven spots to No. 22 on the list of the world's most expensive cities. The drop was attributed to the weak U.S. dollar and decline in housing prices. New York was the only U.S. city in the top 50, with Los Angeles at No. 55, Miami at No. 75 and Washington, D.C. at No. 107. Taking the top three spots were Moscow, Tokyo and London.

The Empire State Development Corp. has declared 17 acres in Columbia University's footprint West Harlem "blighted," making eminent domain proceedings possible and forcing property owners to consider selling their land. The ESDC is expected to formally approve the university's $6.28 billion expansion plan in the fall. The area, lined with warehouses and auto-body shops, would be transformed into a tree-lined campus with towers of classrooms, laboratories and student housing. Most of the area's buildings would be torn down. Columbia already owns about 90 percent of the private property in the area, which is bounded by Broadway, Riverside Drive, 133rd Street and 129th Street.

Columbia University is to acquire a 15,000-square-foot city-owned Metropolitan Transportation Authority parcel on 131st Street. The $3 million transfer, worth $200 per square foot, should occur sometime in the spring of 2009. The university will not pay the $3 million in cash, but will be credited for work performed at a park called Hudson River Piers that is under development in West Harlem.

Three architecture firms released designs for Vornado's planned tower above the Port Authority Bus Terminal. Rogers Stirk Harbor and Partners, Richard Rogers' London firm, which is designing Tower 3 at the World Trade Center, released a design that is made up of four boxes stacked atop each other and bound together by open truss work. Pelli Clark Pelli Architects of New Haven, Conn., released a design that features a basket-weave-like curtain wall. The sleekest of the three, by Manhattan's Kohn Pederson Fox, features a bright, glass-clad tower.

The World Trade Center's transit hub will no longer have a retractable roof. The hub's winged dome, designed by Spanish architect Santiago Calatrava, was originally designed to open to allow light into the atrium.

A former executive director of the Port Authority sent the U.S. attorney for the Southern District of New York, Michael Garcia, a letter calling for an investigation into the reconstruction of the World Trade Center. Marlin said the project's misleading schedules and budgets amounted to defrauding investors. This comes after an announcement that the Authority cannot present a timeline for the project.

The Pier 40 Working Group got its first look at a new joint proposal for Pier 40 this week, after asking the Pier 40 Partnership and Urban Dove/Camp Group to combine their redevelopment plans. The new proposal for the decrepit pier off of West Houston Street includes three public high schools, 75,000 square feet of retail space, 50,000-square-foot event and open space.

Fashion designer Versace will design the new interiors of the Clock Tower building at 5 Madison Avenue. Africa Israel is developing the Clock Tower into a residential condominium with a restaurant and spa. Versace will design the interiors of 55 new condos, plus common areas, a spa and a restaurant.

Wall Streets banks and brokerages may cut bonuses by 20 percent this year. Governor David Paterson said that each 10 percent reduction in bonuses costs the state $350 million in tax revenue, and the state could lose $1.7 billion from Wall Street's falling profits. Last year, New York's financial service firms paid $33.2 billion in bonuses, for an average of $180,420 per employee. The 2007 figure was 2 percent lower than the record $33.9 billion of the previous year.

Warning signals were flashing over the past two years at IndyMac Bank, but government regulators missed them. The study said that there were at least three missed chances in the past two years to reel in the failed lender. The Center for Responsible Lending has laid part of the blame on the federal Office of Thrift Supervision, saying the agency did not perform even the most basic oversight. The FBI has added IndyMac to its probe of lending practices.

Former New York City mayor Rudolph Giuliani's investment firm is making its first foray into real estate, planning an investment fund for commercial and residential real estate in New York and Washington. Giuliani Partners, a management and consulting company, will try to use the weak dollar to lure foreign investors and will form a partnership with Berman Enterprises.

About 144,000 stores will close around the country this year, up 7 percent from last year, the largest one-year increase in the 14 years.

Merrill Lynch's decision not to move to a new World Trade Center skyscraper is another setback for the delayed, over-budget project. A commitment from Merrill Lynch, which just reported a quarterly net loss of $4.65 billion, could have helped attract other commercial tenants.

The bankruptcy of the Steve & Barry's discount chain is expected to hurt the Manhattan Mall.

Gary Barnett, president of Extell Development, has encountered resistance in the Diamond District as he moves forward with the Diamond Tower. Despite state restrictions that the majority of units go to diamond-related tenants, he has also begun buying air rights at neighboring buildings.

Developers are eying two blocks in Chinatown now that the city council has approved the re-zoning of the area between Walker and White streets, Broadway and Lafayette Street. The two blocks have been changed from a manufacturing zone to a commercial zone allowing commercial, residential, retail and community facility uses, following the council's approval.
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