Is there a bubble in the office sector? In the market for the most visible and best-located assets, Manhattan’s current spate of trophy sales begs a more nuanced question: has pricing moved from merely aggressive to excessive? The dominant view amongst high-profile investors and lenders is that pricing remains in check. But that means very little, it turns out, since frothiness in the asset market can only persist as long as the chief stewards of capital believe we remain on an even-keel. Baudelaire could have been talking about real estate markets when he surmised, “the finest trick of the devil is to persuade you that he does not exist.” Likewise, in assessing whether trophy office prices may be prone to correction, we need something more than our basic intuition.
Some say that cycles in real estate are inevitable, that the idea shouldn’t be to prevent them, but rather to enter the wave early enough to surf, so to speak. But whatever your thoughts on the market’s boom and bust, recent changes in the commercial mortgage market might give you pause. It may be time to stand up—or bail out.
Many statistics point to a drastic rise in land values in New York City, pushed at least partly by a flood of equity. That, in combination with more leverage and more building trades, indicates what brokers like to call “frothiness.”
Lessons from the Street
One of the questions I am most frequently asked these days is whether the commercial real estate sales market is experiencing bubble conditions. In answering this question, I usually say that current market conditions present excellent arguments both for and against a bubble. It is a question that would make a great topic for a Read More
A question I’m getting a lot these days is “Should I grow my brokerage business in this hot market? I think we may have reached a peak?”
Well, the market is certainly on fire and increasing resources and reinvesting in your business is something we should all be doing. The challenge for many is that Read More
“The ability to socialize and collaborate is one of the founding blocks of creating a tech community,” writes Ashkán Zandieh, director of the creative and start-up advisory division at ABS Partners Real Estate, in the latest edition of his quarter TechStarter report. Mr. Zandieh has been involved with the technology sector for seven years. He created and sold a start-up, has advised several fledgling companies and tracked the field’s real estate activity for the past year. From ABS Partner’s Union Square area office, Mr. Zandieh is well-positioned to observe and dissect the red hot Midtown South tech real estate market and, if he looks south, the growth of the Financial District as a tech and new media contender.
Mr Zandieh spoke by phone with The Commercial Observer.
The Commercial Observer: How is the tech-fueled Midtown South commercial real estate market holding up?
Mr. Zandieh: The average asking rental price per square foot increased from an estimated $38 per-square-foot in 2011 and 2012 to nearly $60 per square foot for Class B buildings in Midtown South in the first quarter of 2013. What’s pretty interesting is that we’re seeing a Class B transition–there’s a fuzzy line between Class B and Class C.
So young companies are still drawn to, and able to afford, the neighborhood?
A lot of the start-ups I’m working with now are down in Soho and expanding by 20 or 30 employees. They’re moving out of Soho and to NoMad, where they can get larger floor plates. By NoMad, I mean 23rd Street to 28th Street between Park and Seventh Avenues.