Regeneration of existing properties driving development.

The Midtown Manhattan commercial real estate market is showing signs of stabilization, but the market has not reached its crescendo as some reports indicate. The good news is that larger companies, for the most part, have finished downsizing, smaller companies are expanding and new companies are emerging. Financial investment management firms are currently one of the largest start up industries entering the market. The market is on the road to recovery and many of the industry's top developers are finally breathing a little easier.

As was the ease in the late 70s and early 80s in New York City, one of the first signs of a healthy market is the widespread renovating/upgrading of older office buildings in good locations - renovation will again out-pace any new development. Market rents still need to rise to justify a reasonable return before we see new office construction grace the Manhattan skyline. With speculative building still too risky a prospect and financing almost non-existent for such projects, developers have turned their energies to facelifts for tired buildings in an attempt to bolster the rent roll.

In many cases these "tired" buildings provide prospective tenants with an essentially "new" product after renovations are complete. 380 Madison, 1301 Avenue of the Americas, 555 Fifth Avenue, 575 Lexington, 625 Madison, 660 Madison and 320 Park are prime examples of newly rejuvenated buildings that are now retaining and attracting Class A tenants. Buildings on the horizon for this type of upgrade are 444 Madison Avenue, 570 Lexington Avenue and 555 Madison. Other buildings will leave their skin and upgrade mechanical, HVAC and electrical systems, such as Rockefeller Center, 125 Park and 11 Madison. This sort of activity will remain the focus of developers for at least the immediate future.

This trend of renovating instead of starting new construction is also apparent in the City's residential real estate market. The strong demand for rental units is the force driving the City's top developers to renovate and transform many of the City's landmark buildings into distinctive residential complexes. Especially Downtown, where buildings have become obsolete and the office market has dried up, we may see conversions of commercial buildings to residential. Although a resurgence of new construction is evident throughout the market, it is the regeneration of existing buildings that was and is driving the residential market.

Rockrose Development Corp., known for its historical sensitivity, has focused a significant part of its energies to residential renovation projects and is now focusing on both commercial upgrades and conversion of commercial properties to residential use.

Another market that has recognized the value of renovation in attracting tenants is Long Island. Suburban markets are once again coming alive and Long Island's commercial market is picking up speed as a more competitive office space environment becomes inevitable. The outlook for Long Island's office market will only get brighter.

Sbarro's acquisition and planned renovation of 401 Broadhollow Road for its new headquarters and Snapple's new headquarters off the Meadowbrook Parkway are evidence of the type of activity shaping the commercial real estate market on Long Island in the 90s.

One of the lowest profile renovations currently occurring on Long Island is the transformation of the Country Life Corporate Campus in Garden City. The complex, which dates back to 1912, is a unique garden oasis in Garden City. Consisting of two primary buildings, 401 Franklin Avenue and 501 Franklin Avenue, Country Life Corporate Campus has been home to Doubleday for almost a century.

Back in 1988, Rockrose purchased the land and the buildings that comprised the Country Life Corporate Campus and instituted with Fox & Fowle Architects the acclaimed $20 million redevelopment of 401 Franklin Avenue. This gut rehabilitation, completed in 1992, marked Phase I of the transformation of the campus into one of Nassau County's most prestigious and unique office locations. Doubleday, which had resided at 501 Franklin since they entered the Long Island market, moved their entire operation to 401 upon completion of the renovation. The building now stands 100 percent leased, with Doubleday occupying 80 percent of the space.

Rockrose is now considering plans to launch the next phase in the revitalization of the Country Life Corporate Campus - the gut renovation of 501 Franklin Avenue, the first building built on the site in 1912. The Long Island commercial real estate market is slowly making a comeback and renovations and upgrades will continue to guide its recovery.

Significant gains in all markets have resulted in a cautious optimism spreading throughout the commercial markets. As developers continue to seek out new opportunities and financing becomes more obtainable, the establishment of a new contemporary identity for tired commercial and residential buildings will be the first step towards revival and eventual resurrection. As overindulgence was the buzzword of the 80s - conservatism defines the 90s.