Sandy Wreaks Havoc on Manhattan CRE Values, Rents
Lower Manhattan commercial property values and rents have been damaged by Hurricane Sandy, say local real estate executives in a new survey. The effects of the storm on New York City has many office and retail tenants looking to relocate, according to owners and brokers who participated in accounting firm Marks Paneth & Shron’s annual Gotham Commercial Real Estate Monitor.
Over half of the real estate executives surveyed said Sandy has hurt commercial real estate property values in lower Manhattan. Twenty percent of the executives said commercial property values in lower Manhattan have been “permanently lowered”; 36 percent agreed that commercial property values will be lower at least in 2013 because of the storm. Only a quarter of the executives say there will be “no impact on commercial property values,” according to the MP&S survey. Nearly half of the real estate executives 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 percent say “many existing tenants will relocate as leases expire.” Only 22 percent 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 MP&S’s real estate practice.
Opinions on where the next “hot” CRE area varied. (The Flatiron/Midtown South district currently has that unofficial distinction.) Eleven percent of real estate executives say the Financial District/World Trade Center/Battery Park City area is the next hot office area; 24 percent say the Garment Center/West 30s is the next hot district; and 12 percent predict that 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 percent named the Freedom Tower (at the World Trade Center site), compared with 44 percent who named the Hudson Yards, 25 percent who named Long Island Rail Road access to Grand Central Terminal, and 24 percent who named the Second Avenue Subway.
Not a subscriber? Click here for a free trial issue!