Siegel: No space is no surprise

Real Estate Weekly, May 30, 2001 by Doug Miller

If you're a broker with a deep-pocketed credit tenant looking for some trophy space, there is no shortage of wonderful new office towers going up around the city.

But, as Insignia/ESG's chairman Steven Siegel pointed out last week to the Real Estate Lenders Association, you had better not count on getting into any of them.

Of the nine new towers going up, he reminded his capacity audience at the Sky Club May 22, seven are already fully leased. The Reuters, Bear Steams, Ernst & Young, Bloomberg, Bertlesman, Jones Day Scient and AOL Time Warner towers are fully booked already, although many of them are not far past the blueprint stage. Arthur Andersen's tower and The New York Times's new building are both halfway to occupancy, he said, so the clock is ticking.

So much for the market collapse.

"I remember in the early 1990's, real estate lending was an oxymoron," Siegel said. "Not anymore. While I'm a cautious optimist, I'm still leaning cautious... But I'm told there are two types of downturns, a U and a V. The difference is a U takes longer to get out of. Today we're in a V and coming out of it.

"Call it a state of 'Divine Equilibrium.'"

Siegel repeated the mantra of all real estate executives: that is, there can be no true dent in the market as long as demand strongly outpaces supply. And while he said that supply would get a shot in the arm over the next several months, it will do little to douse the flames.

But some of the more remarkable gains made during 2000, Siegel said, will be tempered.

"On Dec. 31, 2000, we finalized the deal where Chase leased 1.2 million SF. Then on Jan. 1 I was told we were in a recession. There will be a shake-out, and I predict some large globs of space will be returned to the market," he said. "Even Chase will put some of that space back on the market. But this is still the best market I've seen in my four decades in this business."

As proof, he recalled the little rhyme his colleagues used to mutter to themselves during the early 1990's doldrums while waiting for the phone to ring.

Survive to '95.