Kass: The NYC Office Market Has Bottomed
This blog post originally appeared on RealMoney Silver on April 5 at 7:29 a.m. EDT.
Last week I spoke to some brokers at leading real-estate management/brokerage companies and to management at several publicly traded REITs in order to get a bead on the nonresidential New York City office market.
In terms of categories:
- The "A" buildings have been able to raise rents by a reasonable amount.
- The "A-" buildings are able to get slightly higher rents.
- Meanwhile, "B," "C" and "D" buildings/locales are still problematic. (The older buildings in the Wall Street area are particularly weak, reflecting new space coming on stream and the fact that the older buildings are archaic and not up to date technologically.)
Several large leases at "A" buildings have recently been contracted in the GM Building ($115 per square foot) and Seagram Building ($105 per square foot).
Interestingly, hedge funds appear to be partly responsible for the uptick in commercial space. For example,
Och-Ziff Capital Management
(OZM)
, which is located at 9 West 57th Street, is taking an additional floor, and
SAC
is negotiating for a huge space (100,000 square feett) in the same building. I think the firm is currently at 540 Madison Avenue, where it has vertical space (several floors) but is now seeking a more horizontal (one floor) plan.
SL Green
(SLG) - Get Report
has announced a 2% increase in new rental rates effective this Monday. My contacts in the management companies didn't have a sense as to whether this is achievable, but they all agreed that it was a sign that things had bottomed and/or stabilized.
Doug Kass writes daily for
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At the time of publication, Kass and/or his funds had no positions in the stocks mentioned, although holdings can change at any time.
Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.