Psychic Angst

So do you believe in psychic bad energy? It’s been quite a memorable last 10 days in New York — Kristen and client #9 started it off and then the crane came crashing down just as JP Morgan Chase and the government were lowering the boom on  Bear Stearns.  We’ve heard about all condo troubles in Miami, Vegas, and Southern California. Well, this crane accident could be symbolic for what’s happening to some of these Manhattan high-rise residential projects. Yes, New York has the benefit of foreign buyers taking advantage of the weak dollar, but the number of high-end apartment buildings going up around town is just off the charts. And now the Wall Street outlook sours dramatically. If I’m a developer pouring concrete on the 24th floor of my sliver development in the East 50s, I’m already getting anxious before the frigging crane keels over. Some of these buildings are pretty ridiculous — asking multi-millions for views looking out from floor-to-ceiling windows across narrow streets smack dab into other buildings in second and third class neighborhoods. You’ve got to be from out of town to be interested in some of these locations especially at the pricetags. Some more on the Manhattan office market from my mailbox (a note from an old boss): He writes: (Besides the Wall Street travail) “you also have all the big law firms laying off tons of lawyers connected to CMBS and sub prime so that component is shrinking. There are also a lot of companies committed to new space that are now trying to get out of the lease or will be on secondary market.  You are on to something.  There is going to be an increase in vacancy and drop in rents.  I do not think it will be that dramatic — 5% drop in occupancy and 10% to 20% in rent per square foot.” Long term holders will weather any storm just fine. It’s the guys who bought in the last two years at those near basement cap rates and their bankers who financed 90% or more of the deals who can’t be feeling too swell.