New York City’s commercial-property market will rebound from Hurricane Sandy as it has from previous disasters, according to local real estate executives.
“As bad as Sandy is, I believe, in a year, we will be back to normal,” Peter Hauspurg, chairman and chief executive officer of Eastern Consolidated, an investment sales brokerage, said today on a panel at the Bloomberg Commercial Real Estate Conference in New York. “New York City has shown itself to be the real estate Treasury bill of the world.”
Flooding in lower Manhattan after Sandy, the biggest Atlantic storm in history, displaced workers at companies including American International Group Inc. (AIG) and Morgan Stanley. As of Nov. 12, almost 29 percent of lower Manhattan office space was out of operation because of the storm, which made landfall Oct. 29, according to brokerage Jones Lang LaSalle Inc. (JLL)
Brookfield Office Properties Inc. (BPO) within the next week will reopen 1 New York Plaza in lower Manhattan, where Morgan Stanley leases more than 800,000 square feet (74,000 square meters), Chairman Ric Clark said during a separate panel. The company also owns downtown New York’s 8 million-square-foot World Financial Center.
Even before the storm, the Manhattan office market’s performance was mixed. In midtown south, technology, media and other so-called creative firms have driven the vacancy rate to the lowest in the U.S., while demand remains sluggish in Midtown and lower Manhattan, where financial companies have been reluctant to expand.
Rents at Manhattan’s best offices fell 7.1 percent in the third quarter from the previous three months, the biggest drop in more than three years, according to CompStak Inc., a New York-based leasing-data provider. Manhattan’s office vacancy rate rose to 9.6 percent in the period from 9 percent, Cushman & Wakefield Inc. data show.
Sandy hasn’t slowed interest among potential tenants in the financial district because the neighborhood has more energy-efficient space and its mass-transit connections make it more accessible than other parts of the city, said Janno Lieber, president of World Trade Center Properties LLC. The company is an affiliate of Silverstein Properties Inc., which is developing towers at the site.
“Every substantial company in New York is looking at downtown,” Lieber said at the conference.
His company owns 120 Wall St., which has been closed since the storm hit. The building will reopen tomorrow, he said.
Jobs lost after Sandy will be replaced by firms that will “help reimagine the city” and hire architects, engineers, designers and construction workers, said Bill Rudin, CEO of Rudin Management Co., the landlord of two lower Manhattan buildings that flooded as a result of Hurricane Sandy.
The city should move to assist people who lost their homes or businesses and take its time to consider large projects such as a sea wall, Steven Spinola, president of the Real Estate Board of New York, said at the conference. While the board has no position on whether climate change is causing more frequent storms, “there’s an acceptance we’ll see these storms more often,” Spinola said. “Therefore, we’ll have to take steps to deal with them.”
Stephen Ross, chairman of Related Cos., said the devastation caused by the storm was underestimated and the city needs better protections.
“The government’s going to have to step up and have some sort of solution,” Ross, whose company developed Manhattan’s Time Warner Center, said at the conference.
Communities should be rebuilt to account for the increasing frequency of severe storms, said Norman Sturner, president and CEO of Murray Hill Properties. Trucks had to be dispatched from Oklahoma to New Jersey to deliver replacements for telephone poles lost during Sandy, he said.
“We just weren’t ready for this magnitude of damage,” Sturner said at the conference. “We have to be smarter next time.”
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