Finally - Analysis of the Office Market in the Outer Boroughs

So now I have finally found a market report (from Grubb & Ellis) for the NYC Office market that includes development in the outer boroughs, which they describe as "booming.". They focus, of course, mostly on Long Island City in Queens and Forest City Ratner in Brooklyn.

The average vacancy rate for outer boroughs office space is 8.6%, as opposed to Manhattan's overall 7.7% vacancy rate (though some submarkets within Manhattan have vacancy rates of less than 2%).

Prices per square foot are dramatically lower than in Manhattan. Brooklyn is the most expensive for $36.54, while The Bronx is cheapest at $28 per square foot. The Bronx also has the second least amount of office space available after Staten Island.

Interestingly, there are 30,000 square feet of office space being built in Staten Island.

It might be nice if someone could build office space in the South Bronx somewhere, but the issue would be space - where would you put it? Can you build decent office space in or very close to a place that is not the hottest place to live just yet? If one were to build a nice office building in the South Bronx, would it spur development of higher end housing and retail?

A Table follows from the report:



Click on image to enlarge

For such a project, one would need a rather daring, creative development firm. The parts of the South Bronx that everyone has had their eye on does not have the greatest public transportation options. I would guess that the office and any associated or nearby housing complexes could just have a van service within it linking to subway stations in Upper Manhattan, the South Bronx and even perhaps Queens.

If I don't get picked up by some firm (as I really prefer to be), I might be tempted to try to gather some funds and develop it myself.

Manhattan Office Rents Continue to Skyrocket

I had a brief meeting with a Property Manager with a noted national real estate management firm. I met him briefly at a networking reception back in April and he called me last week asking if I wanted to explore Property Management.

Property Management doesn't turn me on so much, but I thought I'd check it out one more time. The Property Management unit in our class was full of a lot of technical details about elevator and HVAC systems. The instructors were great but the presentation was long and made my eyes glaze over (as well as most of the class). I am more into the business end, negotiating leases, thinking up new ways to boost revenue and minimize expenses. I'd rather outsource all of the technical stuff to experts, whom they said we would need to surround ourselves with anyway. I suppose I could do it if I had limited choices, but I'd rather confirm that my choices are limited before I do something like that.

Anyway, one thing that grabbed me was that he gave me a short tour of the building, including a space they want to lease. I told him that they should be able to lease it quickly as office space is in such demand (especially as this was on Park Avenue). He told me that they were asking for $175.

Last I heard (from an article in The Real Deal), office rents had reached a record of $125. I was wrong, $175 is that record.

But that's not all! He said that another building was asking for $200 per square foot.

It occurred to me that in a couple of years, if not right now, it might be worthwhile to get into the construction industry. Or better yet, buy stock in a construction or construction related company. Another senior analyst at a major financial firm with a real estate group that if current trends continue, a construction boom will begin in about 2 years that will help moderate office prices in Manhattan.

According to another guy I know who is a construction manager, the construction boom has already started
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IT'S GOLDEN GULCH IN OFFICE RENTS

By LOIS WEISS

June 19, 2006 -- Rents for the top floor of the city's two premier office towers have just hit the sky-high price of $175 a foot, becoming the nation's priciest office space.

Brokers say the tab for entrée into the 50th floor of both 9 W. 57th St. and the GM Building is $25 a foot more than space at competing Park Avenue properties including Lever House and the Seagram Building.

These buildings are among about a dozen skyscrapers dubbed the Country Club Buildings for the lavish company they keep.

"Even entertaining inflation, it's a remarkable price," said Scott Pudalov of CB Richard Ellis. "It's the pinnacle."

Both buildings are filled with elite players in the business world, from Ron Lauder and, soon, Joseph Perella at the GM Building to Bill Mack's Apollo at 9 West.

The available 6,000-foot suite at the GM Building at 767 Fifth Ave. comprises a portion of the penthouse floor.

"This is the best building in the best location and is also the best managed building in the city," building agent Ken Friedland of CB Richard Ellis said.

The 30,000-square-foot spread at the swooping white and black 9 West 57th St. encompasses the entire floor at 57th Street and has unparalleled views of Central Park.

"They made it very clear, the asking rent is the taking rent and if you don't want it, you're not the right person for this deal," said one broker who asked not to be quoted.

Peter Turchin of CB Richard Ellis, who could not be reached for comment, has recently taken over the office assignments at the tony tower owned by Sheldon Solow.

Solow has been holding off renting spaces until the market reached his expectations. "He understands the future and holds the space off knowing it could be two or three years, and then the rent is higher," said Pudalov.

Richard Farley, senior vice president and director of leasing for RFR Holdings, which represents the Seagram Building and Lever House, is now pitching the two top floors of Lever House, which are 10,400 feet each, at $150 a foot.

City brokers are still astounded at the fast and furious pricing for the better buildings.

"It is amazing that $125-a-foot-and-up rentals make other Midtown rents at $75 a foot sound cheap," said Studley CEO Mitchell Steir, who represents only tenants.