Lower Manhattan Commercial Property Values and Rents Damaged by Hurricane Sandy, Say Local Real Estate Executives
As 2013 begins and many large office buildings in New York’s Financial District struggle to come back online, city real estate executives express pessimism about the health, and even future, of the Lower Manhattan commercial real estate market.
That’s according to a recent survey of more than 100 New York commercial property owners, brokers, managers, attorneys and other real estate executives by accounting firm Marks Paneth & Shron.
The majority of real estate executives (56%) say Hurricane Sandy has hurt commercial real estate property values in Lower Manhattan. In fact, one in five (20%) say commercial property values in Lower Manhattan have been “permanently lowered” because of damage from Hurricane Sandy and the aftermath, and another 36% concur that commercial property values will be lower at least in 2013 because of the storm. Only a quarter say there will be “no impact on commercial property values,” according to the survey, MP&S’s Gotham Commercial Real Estate Monitor.
Generators, boilers and pumps help buildings in Downtown Manhattan recover after extensive water damages following Hurricane Sandy.
Further, nearly half of the real estate executives (47%) say property owners in Lower Manhattan “will be forced to lower rates and offer incentives to retain existing tenants” because of Sandy and its damage. And an additional 19% say “many existing tenants will relocate as leases expire.” Only 22% say Sandy will have no impact on commercial leasing in lower Manhattan.
“There’s a strong view that Lower Manhattan’s commercial real estate market is almost as damaged as some of the buildings there. Whether this presents an opportunity or significant liability for tenants and investors depends on your vantage point and time horizon. It’s clearly not great news for owners right now,” said William H. Jennings, Partner-in-Charge of the Real Estate Practice at Marks Paneth & Shron.
Notably, only 11% of real estate executives say the Financial District/World Trade Center/Battery Park City area is the next “hot” office area (as the Flatiron/Midtown South district is today). In contrast, nearly a quarter (24%) say the Garment Center/West 30s is the next hot district. Interestingly, 12% say Downtown Brooklyn is the next hot place.
When asked which major development project will have the most positive long-term impact on commercial property values in their respective neighborhoods, only 8% named the Freedom Tower (at the World Trade Center site), compared with 44% who named the Hudson Yards, 25% who named Long Island Railroad access to Grand Central Terminal and 24% who named the Second Avenue Subway.
The Gotham Commercial Real Estate Monitor from Marks Paneth & Shron represents the findings of a survey of over 100 top commercial real estate professionals in the New York City market. They included owners and managers of commercial property and commercial real estate brokers, agents, attorneys and accountants specializing in the sector. The research employed a dual-mode methodology of self-administered questionnaires completed either online or on paper by respondents. Interviews were completed between November 16, 2012, and January 4, 2013.