Manhattan Rents are GOING TO FALL

Office rents already fell...

Manhattan Office Rents Fall for First Time in Three Years
2008-06-27 10:56 (New York)

By David M. Levitt and Daniel Taub
June 27 (Bloomberg) -- Manhattan office rents fell 2.2 percent in the second quarter, the first decline in the most expensive U.S. office market since 2005, according to real estate broker Studley Inc.
The decline was 4.4 percent for Class A office space, according to a preliminary second-quarter New York market report by Studley, which represents tenants. The broker blamed a ``malaise'' among Wall Street securities firms, which hadn't previously stopped the rise in rents, in a report by Steven Coutts, Studley's senior vice president for national research services. The full report will be released next week.
``We're really starting to see the culmination of what people have been expecting to occur since the fourth quarter of last year,'' Coutts said in a telephone interview. ``It's the result of the whole chain of events, from the subprime to financial jobs being lost in the city. In some cases, it's starting to affect secondary industries. We're starting to see a slowdown in advertising and publishing.''
New York City's Independent Budget Office said in a report last month that it expects the city to lose 33,300 finance jobs, a decline of 7.1 percent from the peak in 2007. That would follow an industry loss of 52,500 jobs in New York during the 2000-to-2003 market drop.
More than 9,000 jobs are being eliminated at New York-based Bear Stearns Cos., acquired this month by JPMorgan Chase & Co. New York has lost 10,000 financial services jobs since last August, a
3.5 percent fall, according to the Bureau of Labor Statistics in Washington.

`Critical Catalyst'

An increase in space offered for sublease, which had been ``contained'' before mid-March, ``was the critical catalyst that moved the market in the second quarter,'' Studley said in the report. Manhattan's office availability rate rose to 8.2 percent in the second quarter, up from 7.3 percent a year earlier and the highest since the third quarter of 2005.
Sublet space available for rent was at a low of 6.2 million square feet (576,000 square meters) in mid-January, surged to 7.8 million square feet in late March, and reached 8.3 million square feet by the middle of this month. While the amount of space for sublet jumped by almost a third since mid-January, the new space available still is less than a third of what Manhattan tenants typically lease each quarter, Studley said.
A rising amount of space available for sublet can cut rental rates because landlords have to compete against tenants who would rather lease at a low price than lose money on empty space.
``A subletter will drop their price much more quickly than a landlord,'' said Ruth Colp-Haber, a partner at Wharton Property Advisors, a New York-based tenant representation firm. ``A landlord needs to keep their rents high to justify their financing, to justify their whole existence.''

Big Blocks

The supply of ``big block'' space, or contiguous areas of 50,000 square feet or more, has almost doubled since its low a year ago, Studley said. The big-block supply rose to 7.6 million square feet from 4.5 million square feet in midtown Manhattan, and to 6.5 million square feet from 2.9 million square feet downtown.
Those numbers ``understate the range of space that is actually available for lease,'' because almost 3.5 million square feet of additional space that hasn't been being publicly marketed ``is rumored to be in play,'' Coutts wrote.
Large landlords such as SL Green Realty Corp. and Vornado Realty Trust are likely protected against rent declines because their occupancy rates tend to be higher than the market average, and their tenants are on long-term leases, Coutts said.

Drop in Values

Declining rents will reduce the value of their properties, he said. New York office buildings have already lost 20 to 30 percent of what they were worth last year, Green Street Advisors said in a May 25 report.
``Even though they're not feeling the pain as far as rent roll right now, ultimately the value of the properties are affected because of the fact that the expectations of increased rent upon lease rollover are absolutely coming down,'' Coutts said in the interview.
Shares of landlords with significant office holdings in Manhattan have declined this year. Boston Properties Inc. fell 1 percent through yesterday, Brookfield Properties Corp. is down 6 percent, SL Green declined 10 percent and Vornado dropped 0.3 percent.
Manhattan's office market may still feel further pain from additional job losses resulting from declines in the financial- services industry, he said.
``This downturn started in the financial sector, the heart of Manhattan's economy,'' Coutts wrote in the report. ``Professional and business firms have just begun to feel the chill of the loss in revenues in the financial sector and will likely start to contract in the coming quarters.''

Falling prices in Manhattan, This must be a mistake.

I'm shocked that office rents have fallen! Certainly there have tens of thousands of Street jobs cut, but isn't the slack being eagerly taken up by foreign office workers who will sit in the emptied cubicles?

David M. Levitt and Daniel Taub must be doom-and-gloom liars.

Now only if we could outsource NY real estate to India. With the boom in jobs and population there and 8%+ economic growth, its a good offshore solution to shore up prices in NY.

don't worry, the foreigners will save us kiddos.

Commercial RE in NYC is still strong (compared to the residential RE market) - so speaketh the Trump on Larry King earlier this week - what a blowhard!

cheers,

the market is segmented. In general, there's weakness in residential rents, but we're doing fine on the high end.

ali r.
{downtown broker}

15% of all listings on streeteasy over $5 million show cuts in asking prices.

So much for "fine."

By 50%?

Where did that Irish carpenter go?

article in the NYT regarding softening of Manhattan rental market

http://www.nytimes.com/2008/06/29/realestate/29cov.html

...“We definitely have seen a shift in the dynamic of the marketplace,” said David J. Wine, a vice chairman at the Related Companies, which owns and manages about 5,000 rental units in New York City. “The frenzy of a year or two ago has abated, and we’re seeing renters be a lot more thoughtful in their rental decisions.”

Landlords have adjusted accordingly.

“A lot of landlords were getting ready to increase rents for the busy season, but they’re finding that those projected rents aren’t attainable,” said Daniel Baum, the chief operating officer at the Real Estate Group New York, a Manhattan brokerage. “No one anticipated having problems on the rental side, and it’s definitely forcing property owners to take a second look at marketing and to rethink their pricing.”

Is 50% the cutoff for "fine"?

jjh3d - that Irish carpenter is already losing quite a bit of $$ on his recent condo investment over here, assuming he's renting it out. If he bought more than one (as many did), than he clearly has to rent and is very likely cash flow negative.

One thing I would not want to be in this market is the landlord of a recently purchased apartment, let alone an absentee landlord.

If he bought as a second home, I wonder if he is questioning that wisdom as well given that airfares are about to skyrocket, so to speak.

don't worry, Martians will evolve and then invade

There's ice on Mars. If there's vodka, too, they might just decide to stay put.

I assume this is the "Irish Carpenter Guy" you have referred to
http://www.nytimes.com/2007/11/04/realestate/04cov.html?_r=1&oref=slogin

By CHRISTINE HAUGHNEY
Published: November 4, 2007
KENNY TIMMONS has spent three long weekends in New York City since 2003, catching up with friends he knew in Ireland, visiting ground zero, restocking his wardrobe at Armani and Niketown and chatting about real estate with a bartender in an Irish pub in Midtown Manhattan.

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Foreign Buyers That was enough of a glimpse of New York for Mr. Timmons, a 32-year-old carpenter from County Meath, Ireland. Last summer, he put down 10 percent on a $760,000 studio under construction at 75 Wall Street.

Mr. Timmons has never seen the apartment and does not plan to live there. Instead, he hopes to rent it out for $3,000 a month when it’s finished next year and eventually to sell it at a profit.

He predicts that a Wall Street address will always be in demand. “If you can’t rent on Wall Street, then where can you rent?” Mr. Timmons said. “It’s one of the biggest business areas in the world.”

And an update on the "Irish Carpenter Guy from April from an Irish Newspaper
http://www.ireland.com/newspaper/property/2008/0410/1207764106963.html
From Meath to Manhattan

NEW YORK Kells carpenter Kenny Timmons invested on Wall Street last summer. Now the falling dollar makes prices at 75 Wall even cheaper, writes Frances O'Rourke

KENNY TIMMONS, a carpenter from Co Meath, is happy with the way his Wall Street investment is coming along: "I was in the property last week and it's nearly ready for painting - I expect to get it by mid to end July."

Not that he plans to live in 75 Wall, the 43-storey 349-unit apartment development a minute's walk from Ground Zero "and 30 seconds from the New York Stock Exchange". The studio apartment he bought off plans for $760,000 (then €558,823) last summer is one of a handful of overseas investments he's made in recent years.

This one is particularly attractive because it is tax free for the first 10 years and Timmons is confident that it won't be devalued by the US property crash. "New York has its own economy." Better still, he's now hoping to get even more rent than he anticipated when he was interviewed by the New York Times last November. Then, he thought it would be around $3,000 (€1,907) a month.

Now he's told he should get $3,500-$4,000 (€2,224-$2,542) because his over 46sq m (500sq ft) studio has a home office space that could be used as a bedroom, as it's quite cut off from the living area.

Timmons, 33, who lives in Fordstown, near Kells, Co Meath, handled the carpentry for around 1,000 houses built by Hollioake Homes (around Meath, Mullingar and Lucan, where the latest phase of one of those schemes, Tullyhall, is being launched this week); he also built 12 houses in the Meath/Cavan area himself.

He read about 75 Wall when it was launched to Irish buyers last summer, checked it out and bought it (through agent Kyle Thomason in Remax in Lucan) "sight unseen", becoming one of the earliest buyers, says New York agent Larry Kruysman.

He was interviewed by the New York Times as part of a feature on how foreign buyers are taking Manhattan, one condo at a time. One market researcher quoted reckoned that foreign buyers - from Ireland to Australia, Russia to Korea - bought about one-third of the condominiums sold in Manhattan in the 18 months to the end of 2007.

Now a new phase of 75 Wall is being launched here by MPS Global: agent Chris O'Driscoll says it has sold six or seven units in the scheme since it started to market them in December. He expects that the strength of the euro against the dollar will attract buyers. What is on offer are studio and "studio lofts" (twice the size of studios) and one to three-bedroom apartments.

Prices (down in euro by about 12.5 per cent on last summer, because of the fall in the value of the dollar) range from $615,000 to $770,000 (€390,979-€490,000) for 41-62sq m (439-668sq ft) studio apartments; 100sq m (1,071sq ft) open-plan studio lofts cost $980,000 (€621,842); 76sq m (816sq ft) one-beds cost $940,000 (€596,429) and 358sq m (3,854sq ft) four-bed four-bath duplex penthouses cost $7.75 million (€4.92m).

The building was formerly the city HQ of JP Morgan Chase Bank and it's being refurbished as a hotel as well as a condominium development. The Hyatt Hotel group will have 251 suites on lower floors, with the 349 condos on floors 19 to 43. Maintenance fees range from $498 to $3,400 (€315-€2,156) per month.

Fit-out is smart, with condos having oak floors and contemporary kitchens and bathrooms. There will be a gym and rooftop party room and apartment residents can avail of hotel facilities like room service, housekeeping and valet parking.

jjh3d - too funny- can't believe you remembered him. Guess the "luck of the irish" has run out.

As "an Irish Carpenter", I think renting his NYC Apt will be the least of his worries

Irish construction industry set for major job losses
Thursday, June 05, 2008

A report carried out by the employment and training authority Foras Áiseanna Saothair (FAS) into construction and contracting forecasts that 65, 400 of the 279,000 currently employed within the construction industry in Ireland will lose their jobs by the end of 2009. The gloomy prediction comes in the midst of the economic downturn worsening and the value of new property declining. An article in the Irish Independent who obtained the FAS report stated that losses will affect…

35,800 craft workers such as bricklayers, carpenters, and plasterers.
9,000 non-craft skilled workers (scaffolders, roofers etc).
10,600 general workers.
2,100 professionals (archi-tects, quantity surveyors etc).

"New York has its own economy."

Apparently it does. An incredibly sinking one.

Did I mention that property prices are crashing in Ireland right now?

foreign buyers are the dumbest money.....this guy will lose at least half of his investment - shoulda flipped it while he still could have. Nobody is going to pay 4k/month for a crappy studio near ground zero - what an idiot.

Anon3_is_back, generaliations dont work. YOu cant say that all foreign buyers are dumb. That is like saying that only blondes have good fun. It varies from person to person and is the same with RE. Some people are good at it and make calculated informed decisions. Others dont know what they are doing. Some of the latter are accidental millionaires having made money in a rising market by taking on risks that they did not understand for returns that occured by virtue of the market rather than their ability.

As for "the Irish Carpenter", as an Irish person, he makes me cringe at his naive RE approach. He mentioned that he has bought a few overseas properties so he has probably bought in Bulgaria, Turkey and Spain. All markets of dubious ability and falling markets.

And yes, Steve, the Irish Property market is falling. It has fallen about 15%-20% on average back to 2006 levels. The banks have tightened lending and we have interesting times ahead. We all do.

Life is not boring.

Latest update from www.irishtimes.com today on the luck of the Irish Carpenter running out.

"By his own admission, Kenny Timmons has never known bad times. When he left school in Kells in 1992 he went straight on to building sites, and by 2004 he had his own carpentry business that employed about 20 men. He has an apartment on Wall Street in New York to his name, and another in Dubai in the United Arab Emirates. "I could see this recession coming here. Unfortunately, I couldn't see it coming all over the world," he says.

Of the 20 men who worked for him four years ago, only two remain, and while he feels the sense of panic is overdone, he admits to feeling a little nervous. "It's tight for money now - very tight. It's the end of the tax year and the Government are expecting a lot of money in from everyone. Everyone is in the same boat . . . a week's wages is all we're getting now.

"The banks are to blame for this. They could have kept a better control on it. They were giving them out willy nilly to everyone, mortgages and loans. And that was driving everything up. And now things are gone down, they're not giving anything out.""

I just rented, I won't tell you where, but it is by a foreign owner in a new development. Next month I'm not paying my rent and until the completion of the lease. I'm not joking. I already have my lawyer picked out. But the amount of time and money it takes to evict, the bank is going to reposess this dude before he manages to get me to housing court. I'm completely serious.

Real estate is a local game. Buying in a foreign country and hoping to play the game will make you a loser if you encounter me. Or likely some other clever guys too.

oh, when doing your application, don't give your SSN. It is easy to run your own credit report / scores and give that out without the core details.

wwsbuy, your lawyer should have told you that as a sublesee (renting a co-op or condo apt. from individual owner, not an rental building), you'll be out on the street if you don't pay you rent on time. The owner can just change the lock and kick you out. And keep your deposit, too.

wwsbuy - If you or some 'clever' guy encounters the wrong landlord, as well as having your lawyers picked out you better have some 24 hour personal security picked out also.

Shamrock, here's a related story referencing good old Kenny. I like the way they label 75 Wall St. a “scheme”:

http://www.irishtimes.com/newspaper/property/2008/0918/1221599466796.html

Scheme: n. a secret and cunning plan, especially one designed to cause damage or harm.

Gotta love the "Irish Price", too.

LOL

what an amazing discussion topic

rents are going to fall ... that is the topic

not a single example is posted
in fact a bunch of people with a leprechaun fetish hijacked the discussion to get off with their personal shamrocks

why can't people provide EVIDENCE?

why can't people provide EVIDENCE?

Hmmm... the observer had an article, which was posted here several times, noting rents were down 8%.

There is evidence, you just need to READ it.