News

By: Massey Knakal Director of Sales Evan J. Daniel

Well it's about time!

 Anyone that has invested or lived in Long Island City and Astoria during the last few years can certainly relate to that statement. A 2001 zoning change to allow for a greater density of mixed-use and residential development led to the growth of a neighborhood that ran rampant through the peak years of 2006 and 2007. Long Island City was among the hardest hit when the economic downturn set in from late 2008 through 2010, a period where the vibrant growth of the area appeared almost frozen in time. Residents moving into their new homes were surrounded by stalled developments, abandoned warehouses, and vacant stores. The reality of the neighborhood they joined was an incomplete picture of where it was going just years before.

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Neighborhoods: Long Island City/ Agents: Evan Daniel

Vice President of Sales Swain Weiner discusses some factors that make Queens a natural for the conservative investor with a long-term strategy:

QUEENS FITS INTO A CONSERVATIVE INVESTMENT STRATEGY

Neighborhoods: Woodside, Sunnyside, Ditmars, Steinway, Jackson Heights, Astoria, Corona

The downtown Manhattan market below Canal Street had 10 sales in 2009 vs.19 in 2008 vs. 46 in 2007. That represents about 47% decrease from 2008 and 78% decrease in volume from 2007. 

Neighborhoods: Chinatown, Financial District, TriBeCa/ Agents: Nick Petkoff

Yesterday Monday March 30, 2009 at 4pm Mayor Bloomberg signed approval of the Bed-Stuy Gateway Improvement District in the Bedford-Stuyvesant section of Brooklyn.  After years of work, the formation of this BID also marks the beginning of an exciting $9MM+ city funded transformation of the shopping experience on Fulton Street between Classon and Troy Avenues.  With key factors like proximity to market center and superior access to transportation this streetscape initiative is the missing link in finally recognizing the deep consumer buying power of neighboring residential blocks.  These results would not have been possible without the leadership of one of the most proactive, cohesive and progressive retail associations in the borough. 

Click here for more information.

Neighborhoods: Bedford Stuyvesant

The East Village/Lower East Side Rezoning Plan was approved yesterday after a lengthy 3 year process. From a statement released by Mayor Bloomberg Wednesday afternoon:

"The new zoning of 111 blocks within the two areas will preserve the unique character of the neighborhoods by establishing height limits for the first time that will prevent new out-of-scale towers from undermining the existing building stock and established streetscapes. At the same time, the plan will create opportunities for new and affordable housing where appropriate on wider streets. It is expected to spur the production of 1,670 additional housing units over the next ten years, including 560 units permanently affordable to low- and middle-income families."

More information about the rezoning can be found here http://www.nyc.gov/html/dcp/html/evles/evles4.shtml

If you have any questions please feel free to reach out to myself at 212-660-7754 or Michael DeCheser at 212-660-7772.

Neighborhoods: East Village, Lower East Side/ Agents: Michael DeCheser

As the national spotlight targets the banking and real estate industries, analysts are divided over the future of NYC real estate, especially in regards to the last six months.  In spite of what news sources have said about the current state of the market, we have found that although activity has been slow through late spring and the summer, prices have not decreased.  However, there remains a static gap between what a seller expects their property to fetch and what a buyer can afford to pay given the lending situation.  Larger property sales (over $50 million) have come to a virtual standstill, especially since banks have tightened their lending standards, expecting a higher return with some type of recourse in the event of a default.

Focusing on the SoHo/Chinatown/Hudson Square submarket, prices have held an overall increase from 2007 to 2008 but the gap between the high and low prices have narrowed.  SoHo in particular continues to overreach average sales prices in NYC. 

SoHo continues to be the staple of the downtown market as people clamor to live and work in the area.  Forbes has named 10013, a zip code encompassing SoHo and TriBeCa, the most overpriced zip code in the U.S., which means that investors and users are overpaying for property in this area simply because of its locale.  In 2007, not only did SoHo apartments have the highest median rent of all NYC neighborhoods in every category, the coveted one-bedroom apartment also had the highest increase in median rent over the last year.  Office vacancies in SoHo are the lowest of all NYC neighborhoods at a mere 1%.  It is still growing further south as name brand stores such as CB2 and Topshop take up space on Broadway below Broome Street, away from the traditional “heart of SoHo”. 

The beginnings of what has made SoHo great have also started to spread westward as new developments spring up in Hudson Square.  Projects such as the Trump SoHo, the Grand Street Hotel and Robert De Niro’s Greenwich Hotel have elevated the neighborhood’s reputation in NYC as an area of commerce with new restaurants and boutique stores.  However, new ground up condo developments that have not broken ground have been troubled as financing and buyers are scarce. 

Hudson Square continues to rise as cutting edge office tenants from Midtown and Midtown South are moving to the lower rents of this emerging area without having to give up the amenities they’re accustomed to.  Creative sector companies such as MTV, Viacom, The Guggenheim Foundation and designer Yohji Yamamoto have all taken space in the area.  Architecture firms and design groups help define the area as a vibrant and energetic office area.  Newsweek signed a lease for 163,000 SF at 395 Hudson Street and international advertising magnate Saatchi and Saatchi renewed a lease for 819,000 SF of space at 375 Hudson Street. These leases have helped anchor and solidify the presence of Hudson Square as one of Manhattan’s fastest growing neighborhoods.  According to a CBRE leasing report, Hudson Square has accounted for 60% of office leasing in Midtown South.  These improvements even launched a proposed Hudson Square BID.

Drawn by the availability of large scale development opportunities in the downtown area, hotel and office developers have staked claim to some prime sites in which to utilize the high 10.0 FAR that comes with the M1-6 zoning.  Millions of buildable square feet of undeveloped property give the area promise as one of Manhattan’s last remaining frontiers.  Talk of rezoning in the southern portion gives hope to residential developers interested in the area who need a variance on the commercial zoning.  These and other developments over the next couple of years will bring Hudson Square up to its full potential as a live and work neighborhood, raising property values to match its neighbors to the east and the south.

The phrase “gentrification of the Bowery” has been well documented in recent times as the Bowery has changed dramatically from the days of transient hotels and abandoned warehouses.  The New Museum of Contemporary Art started the revitalization of the Bowery, and many residential and hotel developments have brought a stream of young designers and new restaurants into the neighborhood.  Here, too, was a mecca for new condo developments and while most are near completion, many have been stalled in light of the current market conditions.  Although the old ways of the Bowery are now quickly becoming extinct, the area will most likely profit as it represents the boundary between SoHo, NoLita, and the Lower East Side. 

Neighborhoods: SoHo/ Agents: Robert Burton

From the The Real Deal:
Verizon secures $20M in tax credits to stay in Newark 
(by David Jones)
New Jersey awarded its first-ever urban transit hub tax credit to Verizon New Jersey Inc., under a sale-leaseback agreement with Accordia Realty Ventures that will keep the phone company headquarters in the city of Newark, officials said.

Neighborhoods: Greenwich Village/ Agents: James Nelson

I’m often asked by investors, “How is downtown Manhattan faring in these uncertain markets?” My answer is that it’s well-positioned to weather the storm. With so much new construction downtown is vibrant, modern and has upgraded infrastructure. Downtown also borders culturally diverse and unique neighborhoods like TriBeCa and Chinatown, which makes it an even more exciting place for investors.

Government support

According to the Downtown Alliance, which manages the Downtown-Lower Manhattan Business Improvement District (BID), downtown Manhattan is the fourth largest business district in the U.S. with more than 90 million square feet of office space. In the last seven years a tremendous effort by government, local advocates and residents have remade the district into a 24/7 community. Federal and state officials, in addition to the Bloomberg administration, implemented an array of measures to get business and residents back to downtown. The Liberty bond program has helped with billions in tax-exempt financing for downtown; The Industrial and Commercial Abatement Program (the former ICIP) is an ambitious public works redevelopment program; and a new Fulton Street Transit

Station and Fulton Street beautification program is in the works. In May 2008 at a Real Share conference, City Council member Alan Gerson also expressed support for business and stated that government can learn from and work with the business community to bring more retail and supermarkets to downtown. More recently, the Department of City Planning approved a rezoning initiated by a developer and changed the manufacturing M1-5 zoning to a commercial/residential C6-2A zoning in an area close to Chinatown. The rezoning is another sign that city officials in charge of downtown understand the needs of the business community and are flexible in their approach to zoning issues.

Visible results

The results of all the efforts to attract businesses and residents are visible – of the 312,000 employees who work downtown, about 55,000 also live there (as compared with about 20,000 in 2001). According to the Downtown Alliance statistics, the average downtown salary in 2007 was $127,619 - almost twice the average for Manhattan. Not surprisingly, a high-end retail corridor has come to life on Wall Street and Broad Street. Tiffany’s recently opened its first new location in Manhattan there, and Hermes. Canali and Thomas Pink have set foot nearby. Additionally, the highest grossing BMW dealership in the U.S. is also on Wall Street. 

With the relatively inexpensive dollar and the eternal Manhattan mystique, tourism is also booming. More than six million people are projected to have visited lower Manhattan by the end of 2008.  Occupancy rates in 2007 for downtown hotels was at a phenomenal 88%, about 10% higher than the average for Manhattan and about 30-40% higher than the industry average. Because downtown attracts a large number of business visitors, its average daily rate was at $340 -over 25% higher than the average rate in the city. A number of owners have decided to cash in on the great revival of downtown – a building at 6-12 Water Street sold for $450 per buildable SF in early 2008. Massey Knakal is currently marketing a development site at 90 Water Street, off of Wall Street, a great location for a hotel.

Exciting new projects

A number of large investors and real estate owners consider downtown their base and in the past few years have engaged in many exciting new projects. Joseph Moinian is currently building a luxury W Hotel south of the World Trade Center site at 123 Washington Street and has finished a renovation at 95 Wall Street, a luxury rental designed by Philippe Starck. William Rudin is focusing on improving his buildings and making them the “most wired and technologically advanced in the country,” while Kent Swig of Swig Equities continues to buy office and residential building. In May 2008, Swig Equities announced it will convert 45 Broad Street to a luxury hotel and residential project with a Nobu restaurant, spa and retail on the ground floor. 

As Mr. Swig famously said when asked why he likes downtown: “With rents of class A office buildings downtown relatively inexpensive to Midtown you can hire limousines for all your senior executives and have them at your disposal 24/7 and still save a great deal of money on rent.” While parking is difficult downtown and the constant construction slows you down, Mr. Swig’s argument makes very good sense. Rents for class A office space are $55 downtown vs. $75 in Midtown. When incentives and tax abatements kick in, average rents downtown tend to be closer to $40 per square foot. 

Challenges and predictions

While the economy has recently slowed and Wall Street seems more somber, downtown still holds its own with other areas of Manhattan. Analysts mostly fear that developers or converters will not be able to finance their projects and that an increase in the vacancy rate of office buildings will put downward pressure on rents, which may lead to foreclosures. The Wall Street slowdown may also put pressure on retail purchases and thus, on retail rents.

While all of these arguments have some validity, we do not expect the slowdown to lead to a major unraveling of the building sales markets or rental prices in the next 12 months.  Yes, projects with low cash flow (developments/conversions or rent stabilized multifamily properties) will probably experience a very challenging environment if they need to finance or refinance now, but the bigger projects will probably survive.  Financial institutions have started giving discounts on commercial mortgages in an effort to reduce their risks to defaults. Debt funds are for now waiting on the sidelines but have large cash piles. Real Estate Alert, a trade publication, estimates that in 2008 there are at least 55 active or planned funds, which have raised $33.8 billion for commercial real estate debt.

The average vacancy rate for office buildings in downtown Manhattan is about 7.7%, according to Cushman & Wakefield.  The number, while up from the last quarter, is still quite low by historical standards. The WTC and the Fulton terminal have experienced delays, yet gone are the naysayers who only about a year ago thought that developer Larry Silverstein would find it challenging to rent the World Trade Center.. Since 2005 more than 20 % of the new commercial tenants downtown have been from counter cyclical industries like education, health care and non profit organizations, which should cushion a potential blow to rents. While buying power of the downtown population has been affected, it is still strong– e.g. Battery Park residents have an average salary of $315,000.

Yes, the promise and excitement of downtown is well and alive, we just need to dance a cautious dance for the time being.

Neighborhoods: Financial District/ Agents: Nick Petkoff

From a Queens perspective, Manhattan looks like the land of the tall and mighty skyscraper – just look at this photo below from the Astoria waterfront.

The skyline of Astoria is changing: a new 15 story building has risen from what once was a parking lot – affordable housing for senior adults is in its final phases of construction on Hoyt Avenue South just by the entrance to the Triboro Bridge.  

According to the Department of Buildings, an eighty unit, 20 story residential tower is going up on 31^st Avenue and the East River waterfront.
Newtown Property Holdings LLC is constructing a 10 story building between 31^st and 30^th Streets, next to Newtown Plaza.

Stay tuned… a lot more of Queens is going taller.

     We have recently compiled a summary of all major commercial real estate sale transactions in Flushing in 2007, and the amount of transaction declined by about 21% compared to the previous year (2006). 
      As the positive effects of fiscal and monetary stimuli take effect, economic expansion is forecasted to gain momentum in the second half of 2008. However there are risks present. Some indicators suggest the housing market has yet to reach bottom, and further job losses are still expected. As record-high oil prices continue to stir inflation concerns, additional Fed rate cuts will not come as willingly.
        In the capital market, unlike the residential market, commercial mortgage delinquency is still near historical lows, but uncertainty continues to cause volatility. Lender requirements reflect the more cautious environment. The demand for well-managed, high-quality assets will remain strong through the rest of 2008. While reduced CMBS lending is slowing the pace of large portfolio sales and REIT privatization, there is still a significant amount of private equity in the Flushing’s marketplace. Private and foreign funds are seeking opportunistic plays. They are poised to jump into the market when lenders release more capital.

Neighborhoods: Flushing