Commercial market still uncertain despite rebound.Despite signs that it is picking up, I fear that the New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. commercial real estate market may be hit as hard in the next couple of years as it was in the early Nineties. Leases made during the mid-70s and 80s will be expiring, and millions of square feet of office space will come on the market by the middle of this decade. Tenants will either renew at lower rents or seek savings in other buildings -- driving the market even lower. Accordingly, the worst may still be ahead. Thus, what is viewed by many as an improving market may result in the further erosion of values. We have been approached to buy a number of prime properties in Manhattan. Ten years ago, we would have snapped them up. Five years ago, they might have made sense. Today, because of the uncertainty of the continuing downward trend in rents, it is difficult to value properties. The worsening wors·en tr. & intr.v. wors·ened, wors·en·ing, wors·ens To make or become worse. Noun 1. worsening - process of changing to an inferior state decline in quality, deterioration, declension market will not improve until the vast overhang Overhang Calculated as stock options granted, plus the remaining options to still be granted, and then divided by the total shares outstanding. Notes: A high percentage for the overhang is usually a bad thing. of office space, primarily in B-class buildings, finally begins to dissipate dis·si·pate v. dis·si·pat·ed, dis·si·pat·ing, dis·si·pates v.tr. 1. To drive away; disperse. 2. , which I believe may not happen for several more years. The only way for the market to improve is for the economy to grow. Until then -- at best -- all moves will merely be lateral, as tenants leave one building and enter another. In the meantime Adv. 1. in the meantime - during the intervening time; "meanwhile I will not think about the problem"; "meantime he was attentive to his other interests"; "in the meantime the police were notified" meantime, meanwhile , many companies continue to announce massive layoffs and "downsizing (1) Converting mainframe and mini-based systems to client/server LANs. (2) To reduce equipment and associated costs by switching to a less-expensive system. (jargon) downsizing ." Combined with the ongoing over-supply of office space, such continued weakening in the corporate world will insure a depressed office market for years to come. Accordingly, we are focusing our firm's investments outside New York City. Currently, I favor sub-markets in, Houston, Atlanta, Orlando, and Washington, D.C. -- areas I view as stable or recovering markets. Occasionally, there are exceptions in this dismal market. From time to time, special opportunities arise involving shifts of large, major tenants to well-located buildings in Manhattan. These shifts provide greater stability to these properties, and could make them attractive to us. In general, however, we are not aggressively pursuing most opportunities in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of . |
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