market research

December 2007

December 2007 New York Commercial Real Estate Market Report

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New York Market Overview

  • Total Manhattan Class A Office vacancies decreased from 5.6 % vacant to 5.3 % vacant
  • Total New York City Office vacancy decreased from 5.6 % vacant to 5.4 % vacant
Demand for Manhattan office space exceeds the pace of new construction. As a result office vacancy rates continue to decline and rental rates continue their upward climb.

New Developments

The Federal government has approved $1.3 billion for the Second Avenue subway's first phase. The first phase is expected to cost more than $4 billion and is scheduled to open in 2014.

A new television transmission may make unnecessary the 408-foot spire planned to broadcast tower on of roof the Freedom Tower. If not built, the tower will be reduced from its symbolic 1,776 feet to 1,368 feet tall, the height of Tower 1 before its destruction.

Columbia University's $6 billion plan to double its size by expanding north into Harlem is expected to be approved by the city's Planning Commission next week. Even if a re-zoning is approved, opposition groups threaten lawsuits. Four property owners have not sold to Columbia.

Donald Trump is in a joint venture with Cherokee Investment Partners to redevelop the struggling EnCap development in the Meadowlands, N.J., a $1 billion project to transform Meadowlands landfills into upscale housing and golf courses, plans to build another golf course at a failed development in Fresno, California, called Running Horse and plans to sell Trump Entertainment Resorts Inc.

Plans for a new 75-story tower for a site next to the Museum of Modern Art in Midtown have been unveiled and were commissioned by Hines. The tower will house a hotel, luxury apartments and three floors that will be used to expand its exhibition space. MoMA would get roughly 40,000 square feet of additional gallery space in the new tower, which will connect to its second-, fourth- and fifth-floor galleries just to the east. The $125 million would go toward its endowment.

Retail Marketplace
A mixed-use tower on Jay Street in Downtown Brooklyn is being planned to be built by Bruce Ratner which will be the tallest building in Brooklyn.

Building permits issued in the Bronx increased 6 percent in October compared to last year. A total of 872 permits were issued.

The planned park along the abandoned elevated railway once slated for demolition, has driven about $900 million in new development through the Meatpacking District and West Chelsea. At least 30 new projects have been designed by such architects as Frank Gehry, Robert A.M. Stern, Jean Nouvel and Renzo Piano. Some property owners who once called for the High Line's demise have now embraced it.

Plans were unveiled for developing the Hudson Yards. Tishman Speyer's proposal which has the most office space ranked last. Related's proposal ranked second but drew complaints about a lack of details. Related has since created a video and another model.

Merrill Lynch passed on its move to Vornado Realty Trust's Hotel Pennsylvania site. Larry Silverstein took the opportunity to present the company with a revised deal that would offer a similar space at a cheaper price than Vornado's $1 billion.

Residential Market

Some new residential developments have reduced prices up to 13 percent, as developers try to unload inventory and pay off loans and taxes.

Foreclosures increased by 120 percent in Queens last month, compared to last year. Foreclosures in Manhattan and the Bronx were about the same. They dipped on Staten Island.

The rising rates of home foreclosures will lead to billions of dollars in lost economic activity nationwide in 2008, including $10.4 billion in the New York metropolitan area. The report also estimated home prices across the U.S. will drop an average of 7 percent next year.

Average Residential buildings sales in Manhattan, south of 96th Street, broke $500/SF for the first time. In Upper Manhattan, average sales price of mixed-use buildings increased by 53 percent.

New York state housing officials have closed a loophole that allowed owners pulling out of subsidy programs to immediately raise rents to market rates. In 23 buildings in New York City and Westchester and Nassau counties that are in the state's Mitchell-Lama program.

Developers seem to be scaling back on the number of new condo developments planned for the city. The number of new condominium offering plans submitted to the office of the state attorney general was down 31 percent citywide for the first nine months of the year, going from 20,877 units to 14,351.

The city expects about 14,000 pre-foreclosure filings this year, about double the number recorded in 2004 and 2005. The neighborhoods at greatest risk are Jamaica and Bellrose-Rosedale in Queens and Flatlands-Canarsie in Brooklyn.

Retail

New York City has again been ranked as the world's most expensive shopping destination. Along Fifth Avenue's priciest stretch, between 49th and 59th streets, a 1,000 square foot lease costs about $1.5 million per year, an 11 percent increase over last year. Hong Kong remained the second-most expensive city and Paris remained third.

About 250,000 square feet of retail space is expected to be added this year, compared to 119,000 square feet last year. Retail employment in Manhattan is on track to increase by 1.5 percent, a gain of 36,000 jobs by year's end, compared to 33,000 new hires last year.

New Construction

Savanna Real Estate Fund is planning a 100,000 square foot mixed-use building at 415 Eighth Avenue which SW of Eighth Avenue and 31st street which is across the street from the Farley Post Office and Pennsylvania Station, Savanna purchased the site for $27,850,000.

A new 19 story196 rental apartments, $200 million rental apartment and retail building will be built at the SW corner of Broadway and 72nd Street. The project is being developed by Philip Pilevsky's Philips International and Rhodes NY.

The City Council has approved a $600 million tower planned by Time Equities next to the Battery Tunnel Garage. The 63-story tower at 50 West Street will be a 155-room hotel on the first 14 floors, while 290 condos will take up the other floors.
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