Mid-Year Roundtable

Real Estate Weekly, July 9, 2003

Real Estate Weekly: We would like to start today by getting your read on the temperature of the industry. Basically, what is the level of activity that your end of the business has seen?

David Lebenstein: Well, I'm involved in commercial leasing and sales and things are very slow. I would say that the activity level is reminiscent of the early 90's, although not quite as bad. There are a lot fewer space showings, a lot fewer people in the market and a lot fewer deals being made. There is more sales activity - interestingly enough-than leasing activity. In fact, there is a mismatch between the lease and sales market. What is happening is that there is plenty of reasonable priced space available to lease, but a lot of the user tenants want to own. I work with a lot of institutions and non-profits and they would like to own and there is virtually no space. You can build it. You can have a new development. But, in terms of existing space, it is almost impossible to find.

Brad Singer: On the commercial construction side, we are not seeing anything new for quite a while. However the residential market seems to be staying strong, especially the condominium market. That has a lot to do with the interest rates being so low. You can get a mortgage now at the same price that you can rent some of the higher rent product. Besides that we have been helping hospitals. They have been keeping strong and I think that has a lot to do with keeping up with technology.

Lenore Janis: I represent many small businesses in the construction industry. And some of our supporters are some of the giants in the industry. The feedback that I am getting right now is that everyone is busy completing work. They have their eye on the public sector now because, as we know, every time the private sector goes down the public sector is always there to catch someone with bridges and tunnels and highways-especially environmental work. We can count on the DEP because its funding is quite separate from the city. We have tremendous activity with interior construction companies reconfiguring office space. Some of it is due to downsizing and some of it is due to the fact that there have been about 10,000 new office jobs in the city. So, this leads to an expansion of office space. We have an industry that has to keep its eye on what will be the next hot sector. As you said, health/hospitals, technical research areas, institutions, schools - our school construction is down right now - but New Jersey s chool construction is taking up the slack.

Scott Gamber: Our firm represents both landlords and tenants and the views, I think, are very different in both of those areas. From the landlord side, I would say that the statistics that we have are showing that there is now a little bit of renewed optimism. There are leases being done. There are tenants that are making-decisions and landlords that are making deals. Downtown has some significant transactions fairly recently, particularly at 55 Water St. So, the statistics will tell you that there is optimism. Vacancy rates are either stabilizing or starting to go down a little bit. From the broker's side or from the agents that represent landlords, I'm not sure if it is the same optimism. I don't think they feel as if they are as busy as they should be, or would be in a good year. On the tenant representation side, which is the field that I specialize in, this is terrific. I'm excited because the more that asking rents come down, the higher vacancy rates are, the better for my tenants and my clients. So, yo u really have to be careful as to what perspective you look at it. There really are a lot of opportunities out there. There are a tremendous number of sublet opportunities. Sublets traditionally have lower prices than direct spaces. So, while the direct pricing is coming down, the sublet pricing therefore has to fall a little bit more. I think landlords are trying to hold up fairly high asking rents, but the reality is that there are transactions being made. The smarter landlords are looking at the bird in the hand vs. two in the bush. Would they rather do a deal today than to have their space be vacant for a little bit longer? I think as we saw Downtown, some landlords are saying let's go ahead and take some tenants that are there. Let's not lose a good credit tenant by trying to hold out for better prices. So, again, on the tenant side it is a terrific time right now. On the landlord side, it appears to be getting better.

Real Estate Weekly: There have been many reports regarding the rebuilding of Downtown, particularly the World Trade Center site. Are you satisfied with the level of progress and do you think the major obstacles still need to be faced?

Janis: We had a fabulous event last week called, 'Meet the Real Estate Industry,' where the construction people had the chance to meet the guys who have the power. One of them was from the Port Authority, Jim Connors, and he said that they have $8.8 billion to spend, which is very encouraging to our industry and about $2 billion to spend on the Path down at the WTC. Also, they are thinking of plans to relocate at least 800,000 SF. So, we see money. Again, public sector money is flowing into that area. This is good, solid money.