New York Real Estate

Commercial real estate is a global concern. A weak commercial real estate market is a drag on economic growth and subtracts from gross domestic product. The state of commercial real estate in a specific region, however, tends to mirror the local economy. Let us take a look at the current state of commercial real estate around the world.

U.S.

Commercial real estate in the US rose to 42.6 (a 1.6% increase) on the index during the 2010 third quarter. Since the index is measured on a scale to 100, these statistics do not indicate a balanced marketplace but the increase is the fourth rise in a row. According to the National Association of Realtors (NAR), the vacancy rate for office space should show a slight increase and come in at 16.7% during the present quarter. The vacancy rate is expected to decline gradually to 16.4% in the last three months of 2011.

NAR's chief economist, Lawrence Yun, points out that signs of stabilization are due to an increased demand for commercial space. Not surprisingly, New York City has one of the lowest vacancy rates. Honolulu is in the same position. Both cities have vacancy rates near 9% while other office markets report rates of more than ten percent.

The NAR says that rent in the retail sector is expected to drop 3.4% from the end of 2010 to the final quarter in 2011. It is believed that rent for industrial property will experience a drop of 7.4%.

NAR predicts commercial vacancies to fall in 2011 as market stabilizes

Canada

If investors have an interest in commercial real estate in Canada, they must be prepared to pay considerable tax. In fact, Canada is the world's most expensive country to invest in commercial property. Investors can be prepared to pay 53% of total income. That figure is 12% higher than the US rate and 44.01% higher than Finland with the world's lowest taxes on commercial real estate. According to a report by Taxand, the average tax rate among the 23 countries in a recent survey fell to 23.5% (a decrease of 0.75%) last year.

High levels of income tax (30%) and real estate (3.6%) combine to create Canada's high tax on commercial property. Yet Canada is not the worst country in every aspect of commercial tax. Canada takes only 14% of sales in tax and that puts it at the world's sixth highest for taxes on sales. With a rate of 21.8%, Norway ranks as the most expensive country in that category.

Canada commercial property tax hit world’s highest

Ireland

Ireland is the world’s most vulnerable commercial real estate market. According to consultants DTZ, Ireland faces the biggest gap in funding relative to its size for refinancing debt. The $6.5 billion shortfall for debt coming due through 2013 equals 16% of the value of Ireland’s commercial real estate investment market. There has been a 60% slump in the value of commercial space and numerous Irish properties are "underwater." Lack of credit in the economy is blamed for low Irish property values.

Irish real estate described as one of the most vulnerable in the world

What Are Your Predictions For Commercial Real Estate In The Coming Year?

Image courtesy of estateagentsaid.co.uk

If you are inside a NYC hotel, you are probably not alone – at least according to industry statistics. During 2010, Manhattan hotels have shown a 90% occupancy rate. At present, the NYC hotel market is favorable to buyer and sellers.

Favorable Market

This market is not expected to lose favor in the near future. Manhattan hopes to welcome more than 46,000,000 visitors by the end of the current year. By 2012, New York City will be entertaining over 50,000,000 guests per year. There was never a better time to be part of the Manhattan hotel industry.

Revenue per available room (RevPAR) in New York City has increased by 7.6% to $135. Yet the national average fell 2% to reach fifty dollars. Major players, as well as smaller entities, are recognizing the potential of the NYC hotel industry.

Recently, the Sheraton opened Brooklyn's first major hotel In 12 years. Hyatt Hotels and Resorts opened Andaz at 485 Fifth Avenue in September 2010. Actually, more than 31 new hotels are expected to appear on the Manhattan skyline between 2010-2011.

Luxury Market

The NYC hotel market is going non-stop with new development and properties changing hands. Even the luxury market is in high demand. Almost 100 transactions during 2010 were for luxury properties with a purchase price of more than $10,000,000.

Of course, all hotel buyers in New York City must be able to handle a high price tag. The 760-room Doubletree Metropolitan is selling for $400,000 per room. The W-New York on East 39th Street sold for $300,000 a room earlier in the year.

Goldman selling 3 NYC hotels

Corporate and Leisure Travelers

Investors are willing to take the chance on NYC hotels. Manhattan is expecting many more leisure and business travelers in the coming months. In particular, the corporate traveler is driving this activity. As a growing number of companies regain strength and revitalize their corporate travel practices, the NYC hotel market will reap the benefits. Regardless, New York City holds such an appeal that vacationers will continue to fill Manhattan hotels.

Inside NYC Hotels

Want a peek inside a New York City hotel? Besides the Andaz at 485 Fifth Avenue, another Andaz opened on 75 Wall Street in January 2010. The boutique-style rooms begin at $220 and offer a Hudson Valley-sourced restaurant, bar emphasizing 'Pullman-style mixed-at-your-table' cocktails, and spa allowing guests to order services in 15-minute increments.

Multi-sized bamboo panels in the lobby mirror the old lock boxes of Wall Street. The Andaz is a condominium/hotel with condos on its upper floors. The smallest rooms in the hotel start at 345-square feet. They have window seats and 11-foot high ceilings as well as double-paned glass with automated sleep shutters. In addition, guests can enjoy 42-inch LCD TVs and iPod docking stations.

The downstairs space houses the gym and casual conference rooms with their own kitchen facilities and espresso machines. The most lavish rooms feature peek-a-boo tubs and rotating closets. Restaurant lamps resemble pearls. Arching woodcuts in the ceiling display watermark detailing from the dollar bill. It looks like dollar bills will be changing hands fro a long time to come in the NYC hotel industry.

Andaz Wall Street opens with rooms from $220

Are You Planning A Stay In A New York City Hotel?

Image courtesy of ny.curbed.com

You probably know someone who has moved to Washington. Of course, it is not surprising that so many people would make the move. The city is the nation's capital – the heart of the country.

Granted, many people just make a temporary move to Washington. The politicians account for many 'back and forth' moves. Even a few politicians choose to stay on in Washington after politics. Washington attracts political types – and not just from the US – and not even just for politics.

Canadian Buyers

Washington has just attracted the attention of the Canada Pension Plan Investment Board (CPPIB) – not for its policies – but for its real estate. The CPPIB invests funds that are not required for immediate use by the Canadian Pension Plan. The board is planning to buy two impressive office buildings in Washington, D.C.

They describe the market as being "more attractive" than a few years ago – and they are not referring to the state of the property. The "very, very, attractive" prices are the reason for the board's interest in Washington. The CPPIB is planning to pay $237 million for a 45 percent stake in the two properties - 1299 Pennsylvania Avenue (the Warner Building) and 1101 17th Street NW.

The figure includes $91 million in equity and $146 million of the outstanding mortgage debt. This Canadian board is making an expensive purchase – even if it is more attractive than before. Peter Ballon, vice-president and head of the Americas division of CPPIB's real estate investments, agrees that it is a whopping sum. Yet he thinks that now is a good time to invest in key markets like Washington. New York and Los Angeles have also been identified as key markets because they are more stable than the rest of the nation.

In case you are wondering, yes, the CPPIB has heard about the damage from the recession. They know about the foreclosures and unemployment. Ballon explains the board's reasoning.

"We are not concerned by the debt market in the U.S. if anything we see it as an opportunity because we are typically an equity purchaser and do not need debt to make acquisitions," says Peter Ballon, vice-president and head of the Americas division of CPPIB's real estate investments.

High Stakes

Now, of course, the CPPIB is not doing all this on their own. The board has Vornado Realty Trust (NYSE:VNO) as a partner in this latest acquisition. Vornado Realty Trust owns 55% of this venture. No doubt, it is quite the venture – with an implied value of US$526 million. Vornado will manage and lease both buildings.

High Style

Last May, the CPPIB announced that it would pay US$663 million to buy a 45 percent stake in two Manhattan office properties including a 51-storey skyscraper in the Rockefeller Centre complex. If you wonder why a Canadian board would not seek out investments in Canada, the answer is – a smaller market. The CPPIB is looking to invest and Washington seems like a fine place to make a deal. It looks like Canadian business is moving into US real estate – in high style.

CPPIB seizes on low real estate prices in U.S. to buy stake in D.C. buildings

Are You Planning To Invest In US Property?

Decreased Demand

Commercial real estate has not been doing much business during the economic downturn. When businesses are closing and joblessness is rampant throughout the country, the demand for commercial space decreases except in a few big cities that weather the economic storm. Start-up businesses (except in specific categories) are few and far between during poor economic times.

Scarcity of Start-Up

Home businesses tend to be on the rise in dismal economic climates. Often unemployed workers try their hand at starting their own venture. Yet home businesses do not require extra commercial space. As well, more lenders set up during economic turmoil to take advantage of the financially-strapped individual's need for cash. Yet this type of lender may run a temporary operation.

Dealing with the Aftermath

Commercial real estate does not thrive in a recession. In fact, commercial space is not in big demand during the aftermath of economic upheaval. Things are still tight, joblessness remains an issue, and people are wary of their financial future.

Attracting New Tenants

Yet commercial real estate is still in business because the sector has no place to go only 'up' in terms of performance and profit. During difficult times, business brings out all the stops to attract new customers. Landlords are now lowering rents and making more concessions to tenants.

"...This is very much a tenant's market, which is quite favorable for businesses that are considering expansion...," says NAR chief economist, Lawrence Yun.

New Development

Development is expected to bounce back in this buyer's market. In a survey conducted by the Society of Industrial and Office Realtors, 57% of the participating 600 market experts predicted improvements in the office and industrial sectors in the coming months.

Commercial real estate remains soft but favors expansion

Office Space

Vacancy rates in office space are starting to level off and should improve dramatically by the end of 2011. Certain cities including New York City, Long Island, N.Y., and Honolulu had low vacancy rates in the office sector during April-June 2010.

Business in the Big Apple

It is no surprise that New York City, a global centre, fared so well in the findings. Studies have shown that more corporate travelers are visiting this thriving metropolis. In fact, a recent report about the NYC hotel industry indicates that Manhattan hotels had more than 90% occupancy rate in May 2010. Business is booming in the Big Apple.

Manhattan Hotel Industry in NYC - Manhattan Report 2010 - Second Edition

Rent Reduction

Of course, office space looks more appealing these days - especially with the offers of reduced rent. The cost of rent for office space is expected to fall 2.7% throughout 2010 and an additional 2.1% in 2011. Based on 57 markets, the vacant 13.6 million square feet of office space in 2010 will be replaced by 22.6 million square feet of occupied office space during 2011. This positive projection focuses on existing office spaces as well as new spaces coming on the market.

Industrial Space

Industrial spaces are expected to follow a similar trend as office space. During the coming year, industry leaders predict a .4% drop in vacancy rates for industrial space. That trend will continue throughout 2011. Industrial rent will decrease by 5.4% in 2010 and experience another drop of 4.7% in 2011.

Is This The Right Time To Invest In Commercial Retail Space?

If you are looking for a hotel room in New York City, you shouldn't have any problem. Next year, it will be even easier again as more hotels are slated to open in the Big Apple.

NEW HOTELS

According to Smith Travel Research, 46 new hotels will have opened in New York before the end of this year. The NYC hotel industry is booming with Manhattan in May having occupancy rates of more than ninety per cent. Occupancy rates haven't been that high in Manhattan since 2004 when they came in at eighty-five percent.

CORPORATE TRAVELER

Actually, corporate travelers are creating part of the boom in the industry. Could that be a sign of a rising economy or just business people travelling further to get business? It will remain to see how that connection plays out in the long run.

As well, New York's hotel figures are often way ahead of other US locations. Let's consider how big a player New York is in the hotel business. Almost one hundred hotels will open this year in major cities across the US and we know that 46/100 will be centered in New York.

CONTINUED GROWTH

The growth in the industry is expected to continue into next year. Observers don't expect tourists to stop coming to New York any time in the near future. So with all those new hotels on the horizon, it is a good time to find a hotel room in New York City. In fact, it is a great time to buy a hotel in New York City.

Despite the talk of big business in New York hotels, the economy is coming out of a slump and, sadly, some did go down with the ship – or go almost underwater. Some fancy hotels are now going for a song – an expensive tune, in most people's eyes – but investors hear the music.

SOLD

The 16-storey, 300,000 sq ft Knickerbocker Hotel (1466 Broadway), built in 1908 by John Jacob Aster, sold for $180, 500,000. In March, Istithmar World Capital, a branch of Dubai World, defaulted on the $300 million mortgage. And, like me, most of you missed out on bidding for the "W New York - The Court" and "W New York – Tuscany." St. Giles Hotel picked up the two midtown Manhattan hotels for $78 million ($243,750 per room).

DON'T WORRY

No need to worry though as you still have lots of chances to buy a NYC hotel. Besides the luxury towers for sale, there are many more affordable hotels on the market. If hotel owners want to raise capital, they recognize that now is the perfect time to sell a New York City hotel. So in NYC hotels, it is a favorable market for buyers and sellers.

REALITY BECKONS

Of course, not everyone is overjoyed with this scenario. Many people hate to see the historic hotels (like the buildings in the Knickerbocker era) from 'America's Gilded Age' going for small change – well, not exactly, small change. Yet some romantics sigh at the change as glamour makes way for reality. Well, of course, the upscale New York City hotels are not really about reality - at least not most people's reality.

Are You In The Market For A NYC Hotel?