Commercial Grade

One of the more bizarre proposals in New York real estate to come along in a while is New York City Council’s bill 847 for commercial rent control, With office and retail rents plummeting in the City, what is the logic in requiring landlords to go to arbitration in the event the tenant did not agree with a renewal rent (like, always!)? According to a memo sent to the membership of The Real Estate Board of New York by president, Steven Spinola

“The bill would mandate lease renewals and the arbitration of commercial rents, would allow tenants to reject the arbitration decision and remain in the space at a five percent increase and grant the tenant a right of first refusal for lease term terms the owner negotiated with a new prospective tenant.”

My guess is that the City Council will see this as the powerful disincentive for investment in New York City real estate that it is, and the bill will eventually die. If it did pass, however, just think of the all that demand for appraisal services as landlords geared up for their mandated arbitration! May as well call it the Real Estate Appraiser’s Employment Insurance Act of 2009!

by Tyler King, Resident Hipster

Currently, if people who know nothing about the local real estate market are to believed, Williamsburg is doomed, kaput, see you in the next cycle, take the bucket and kick it, put a fork it because its done, finished. But after a little digging some interesting things are coming to light. First, things have sold in 2009. In fact, whole buildings have sold with absorption harkening back to the glory days of 2007. Furthermore, more buildings are coming to market. In the past couple of weeks the brave folks over at Corcoran began marketing a 38-unit project located on the corner of North 10^th and Berry called the Allen Building. This is an interesting test because directly next door is everyone’s favorite swiftly selling development, Mason Fisk (72 Berry Street). 26 units, three months, boo-yah! And this was in 2009 no less.

The great thing about what is happening in Williamsburg is all the broker posturing and babble is coming to an end. The public record is the arbiter of truth. Luckily, for all of the readers out there, I took the liberty to doing a little research and finding out exactly what things are selling for. Mason Fisk did in fact sell like a gazelle being chased by a cheetah (fast). However, pricing was about $620 per square foot. Peak pricing in Northside Williamsburg two years ago? Somewhere around $750 to $850 a foot. Hey Williamsburg, the phone is ringing and twenty to thirty percent declines are calling!

So now the Allen Building (70 Berry Street) is bravely coming to market. I found some shiny, brand-spanking new listings with an aggregate average asking price of $657 per square foot within the building on the Corcoran website. Taking into account a listing discount, this is right in line, or in this case next door to, Mason Fisk. Developers out there should take notice: Pink is the new black, and $600-$650/SF is the new baseline in Williamsburg. Underwrite with care my friends…underwrite with care.

The market for development sites has been essentially paralyzed over the past year. Whereas there were numerous land sale transactions prior to the economic downturn that began in September 2008, for most of 2009 the land sales market has been barren. Sellers were still pricing their land based on historical condo sales, while buyers were underwriting based on rentals. The resulting gap between buyers and sellers was large and exacerbated by the fact that there was no financing to buy land anyway. So nothing sold. The few land sales that took place were to “users” (such as the Korean Government’s acquisition of a site on East 32^nd Street in the heart of “Korea Town” for $366/FAR) which didn’t say much about how land values have really moved.

Finally, though, last month there was a real live land sale…to a developer planning on building condos! 41 Bond Street in Noho was purchased last month for $323/FAR. The site had reportedly received all approvals and was “shovel ready.” Most importantly, the buyer was able to assume the debt on the site, plus the mortgagee gave a commitment for the construction loan as well.

So over the past few months the Dow exceeded 10,000, big Wall Street bonuses were announced and, now, a land sale to a condo developer. Ah…everything’s getting back to normal again. I think I’ll sleep well tonight!

After several years as a guest blogger on Jonathan Miller’s Soapbox, Commercial Grade is staking out on it’s own. Yes, it’s a little scary…I haven’t ever blogged solo before…never even tweeted!…but we have much to say about the New York real estate market. (I know..who doesn’t?!) Check back often for our keen insights…and an occasional cool photo