REBNY luncheon speakers see strengthening market.

In a refreshing display of optimism, speakers at the March members luncheon of the Real Estate Board of New York forecast moderate but steady improvement for most of Manhattan's real estate marketplace in 1994,

REBNY Chairperson Bernard H. Mendik set the tone for the proceedings by announcing that "this is an industry that's starting to fly again."

Program moderator Kevin R. Wang, senior vice president and partner of the Mendik Company, pointed to several positive trends. Over the past six-to-eight months, he said, there has been more leasing activity; notable expansion among small-to-medium-sized tenants; greater eagerness on tenants' part to consummate transactions; a decline in requests for proposals; more offers; and a tightening of concessions as well as slight rent increases,. which "should lead to higher effective rentals in the near future."

William H. Stern, managing director of Sonnenblick-Goldman Company and head of its Brokerage Department, was optimistic about prospects for building sales. He said his firm had obtained financing commitments lately from offshore investors and domestic pensions funds for fully, or mostly occupied office buildings whose leases still have a long time to run. Stern noted that office properties must meet rather stringent tests to attract financing, but apartment buildings present less of a challenge.

Stem also reported arranging some financing recently at 150-to-200 basis points over Treasury bills. "We're loaded with money to buy," he declared, adding that "the whole world from Bruni to Switzerland is in the equity business. Our equity volume is greater.than our debt volume."

Martin Turchin, vice chairman of Edward S. Gordon Company and leader of that brokerage's Corporate Realty Group, told a tale of two markets - Midtown and Downtown. While Midtown's availability rate stands at 15 percent, he said, there is a shortage of large blocks of space (250,000 square feet and more). The supply of such units has declined almost 60 percent over the past two years, he reported.

Noting that except for the Grand Central District, most areas of Midtown experienced 'lots of leasing activity' last year, Turchin said the greater demand focused on units of 10,000 square feet or less. He also advised that Midtown's absorption rate has been positive for the past 24 months.

Turning to Downtown, he noted that the area's availability rate of 23 percent reflects a demand rather than supply problem, because the district's inventory has remained constant for the past several years. In contrast to Midtown, he advised, lower Manhattan has more large (100,000-plus square-foot) blocks of space available, and features more "pronounced product distinctions," or building types and location grades. He said that the Financial District has suffered worst from the recession, and that late post-war rehabilitated structures and 1980s buildings are doing best in the contest for tenants.

In Turchin's view, the "flight to quality buildings" and the functional obsolescence of much inventory there are key factors in lower Manhattan's future. He also observed that Manhattan needs around 20 million square feet of available office space at any time to prevent a 'super overheated market' that could generate unwarranted construction.

Alan Rogers, managing director of Douglas Elliman-Gibbons & Ives, covered recent trends in Manhattan's residential sector. He noted that cooperative apartment prices are. off between 25 and 30 percent from their 1988 peak, but the pace of decline is slowing; prices dropped 3 percent during the year just past. He observed that apartments with five or more rooms are doing best, and that location, as ever, is a crucial price determinant.

He cautioned, though, that portions of the market remain soft: smaller units sustained an 11 percent price drop last year, he said, and there was a 19 percent fall-off in sales volume. He predicted a strengthening market driven by low prices, low interest rates, higher individual tax rates that make home ownership more advantageous, and the impact of exceptional bonuses recently paid to fmancial services executives. As a harbinger of better times, he cited the rental market's 18-month turnaround, with rents now back to 1988 levels. He said that this situation would eventually encourage many renters - especially the more prosperous - to become buyers.