3 World Trade Center

News / Press

TRD forum: Manhattan’s office and resi markets still have plenty of room to grow, developers say

TRD forum: Manhattan’s office and resi markets still have plenty of room to grow, developers say

May 14, 2018
By Will Parker | The Real Deal | The Real Deal

With more than 2.5 million square feet of office space coming on in Manhattan every year, the question must be asked: Do we need all of this?

Developers insist yes, and ask that you look to rest of the world as evidence.

“If you look at London in the last 20 years, London’s replaced 50 percent of their stock with new office space. If you go to Hong Kong, that number is 80 percent. If you go to New York that number is 7 percent,” said Silverstein Properties’ CEO Marty Burger, speaking on the new development panel at The Real Deal’s 11th Annual New York Showcase and Forum on Monday. Burger, whose company is the developer of the World Trade Center complex, said that for New York City’s markets to remain competitive with other international centers of commerce, its workspaces have to keep up too.

The Monday panelists, which included HFZ Capital founder Ziel Feldman, Alchemy Properties president Ken Horn and developer Bentley Zhao, picked apart the state of development in New York on both the luxury residential and commercial fronts. They largely rejected the idea there is too much supply.

Horn, whose company is redeveloping the top floors of the Woolworth building into apartments, said that the much-cited high-end condominium glut is slowly “being eaten away,” making room for new development opportunities. Feldman likewise said that although marketing apartments has become more challenging, the challenge is met by “pric[ing] within your comp set and try[ing] to create an experience that people can’t [find] elsewhere.”

When asked about how things are going with the Woolworth’s aspirationally-priced $110 million penthouse, Horn said that in just the last week the unit is physically accessible to prospective buyers for the first time, which he hopes will increase interest. “We were concerned about safety,” Horn said of the under-renovation, five-floor penthouse.

As for the availability of debt and sources of equity, the developers said they weren’t having trouble getting that either. While EB-5 visa money has slowed down due to immigration wait times, the Israeli bond market has emerged as a reliable source of capital.

And non-traditional investors have stepped in as banks have become more conservative with new development lending. Even at high interest rates, panelists said there are advantages to getting loans from single funds as opposed to a consortium of different banks. “It’s very attractive on a large construction job [to just deal with one lender],”said Feldman, who closed on a $1.3 billion construction loan from the Children’s Investment Fund last year for HFZ’s condo development at 76 11th Avenue.

“If you’re dealing with one party like Children’s Investment Fund,” said Berger, “you call one guy and he makes a decision.” Dealing with multiple banks makes the simplest tasks much more difficult during development, he added.

As for Zhao, he cited his company’s ownership of its own construction operation as one way he makes the numbers work in an environment with more expensive debt and high land prices.

Meanwhile, condo inventory loans have helped developers wait out the eventual sales of their units for a return. “As you sell units they get paid off,” Feldman, who received one at the Belnord condo conversion, said “It’s another way of getting money out the door.”

The Monday panel also touched upon foreign buyers (they aren’t going away), on the potential oversupply of work from celebrity architects Bjarke Ingels and Robert AM Stern (buyers still want it) and tax reform (40 percent of high-end buyers make their income via pass-through entities and are seeing their taxes drop, Feldman said).

Terms of Use

Copyright License

Use of this Website is subject to the terms of this disclaimer and by using the Website, you agree to these terms. Silverstein Properties, Inc. ("Silverstein") publishes this Website solely for general informational purposes and nothing herein is intended to be an offer of property, or leasehold or goods or services or employment or a representation as to property, or leasehold or goods or services or employment that will be provided to any person. Silverstein obtains some of the information on the Website from third parties and makes reasonable efforts to provide accurate information on the website. However, it cannot guarantee its accuracy and under no circumstances will it be responsible for inaccuracies whether in material provided by Silverstein or obtained from third parties. The information contained herein may change without notice. The information contained herein will only be considered a representation of Silverstein if repeated in a final contract signed by an authorized Silverstein representative.

Disclaimer

Silverstein Properties, Inc. grants to you a limited non-exclusive, non-transferable license to view, copy and print the material on this web site (other than the design or layout of this Website) for your non-commercial or personal use only. All copies that you make must retain all copyright and other notices that are on this Website. Otherwise, you may not use, distribute, sell, modify, transmit, revise, reverse engineer, republish, post or create derivative works of the material on this Website without Silverstein Properties, Inc.'s prior written permission in each instance.

© Silverstein Properties, Inc., all rights reserved except as expressly provided elsewhere on this Website.