During a panel discussion on the state of the market here, which was moderated by CB Richard Ellis' president of the New York tri-state region John Powers, at the Real Estate Board of New York's member luncheon, Peter Riguardi, president of Jones Lang LaSalle in New York, noted that potential. "In this economy, big companies have big cash … and they look to buy out other companies," he said. In November, JLL was selected by Wachovia to sublease more than 400,000 sf of space at One Seaport Plaza. Wachovia had obtained the space through the July 2003 combination of its brokerage subsidiary, Wachovia Securities, with Prudential Securities.
Studley chairman and CEO Mitchell Steir noted that the effect of subleased space is "tremendous." He pointed out the keen difference in the market now and 1997 when there was similar availability rate. "Then there was 20% sublease, today it's 37%. But the slightly good news is that it was up as high as 47%."
Riguardi and Steir predicted that 2004 will be a year for a large amount of transactions, but with the same rents and concessions. Riguardi said the market's current "sweet spot" is the 10,000- to 50,000-sf range. Steir feels that last year's darling, the law firm sector, which accounted for 20% of the leasing transactions last year, looks to continue that trend.
When it comes to investors, Scott Latham, a senior director in Cushman & Wakefield's Financial Services Group, pointed out that real estate fares well in competition with the stock market. "US and foreign investors have come around to the conclusion that real estate is a very stable place to put your money. It delivers real returns." Armed with statistics, Latham detailed the changes in the New York City investment market over the past few years. In 2002, 40% of transactions were completed by REITs as compared with 8% in 2003. Private investors accounted for 46% of transactions. "The primary reason was the low interest rates," he noted.
The panel expects the Downtown v. Midtown debate to continue with some companies looking to Lower Manhattan to take advantage of the lower rates and incentives, while others will look at the economic situation as an opportunity to make a move to Midtown. "New York is a vibrant place with a limited amount of space," Riguardi said.
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