New York City office building prices may have risen too high, given sluggish demand for space, Forest City Ratner Cos. Chairman Bruce Ratner said today.
“The office market is OK,” he said in an interview on Bloomberg Television’s “Street Smart” with Adam Johnson and Trish Regan. “It’s holding its own. But I’d be concerned about these trophy prices for some of the office buildings.”
A partnership including Crown Acquisitions Inc. agreed to pay about $2,100 a square foot, a record, for 650 Madison Ave., a 600,000-square-foot (55,700-square-meter) tower in the heart of midtown Manhattan’s Plaza district. The price was driven largely by the building’s retail space. Across the street, the families of Chinese real estate developer Zhang Xin and Brazilian banking billionaire Moise Safra bought a 40 percent stake in the General Motors Building at about $1,700 a square foot. The record had been $1,583 a square foot, set in 2007.
Midtown office prices jumped 4 percent in May after being stable for several months, according to a report this month from Green Street Advisors Inc., a Newport Beach, California-based real estate research firm. “Gathering momentum” should boost prices in coming months, the firm said.
Buyers shouldn’t expect a big increase in office demand, said Ratner, who built New York Times Co.’s headquarters tower on Manhattan’s west side. He is also the developer of Brooklyn’s Atlantic Yards apartment project and its centerpiece, the Barclays Center sports arena, as well as Frank Gehry’s New York by Gehry residential tower in lower Manhattan.
Tenants “are using less square feet per person,” he said. “And the economy is still iffy. All of us real estate people, all of us in business, are wondering what’s happening in this country. While New York is doing great by comparison, we still get affected” by troubles beyond the city.
Ratner said he is bullish on New York’s residential market. Apartment rentals are “going crazy,” while condominium prices are rising and will continue to be strong, he said.
“It’s happened so many times before,” he said. “When the world gets unsettled, we get foreign money coming here. We have a situation where we’re probably the only place in the world that people look at as safe. And in this country, we’re the strongest place right now.”