The financial reform bill finalized in Congress last week is impeding the recovery of New York City’s suffering office market, the Wall Street Journal reported. Major financial firms accounted for about 46 million square feet of Manhattan office space two years ago, enough to fill up more than 16 Empire State Buildings, according to CoStar. But the finance bill, which is set for a vote this week, may force big banks to cut back their proprietary trading units and reduce investments. Though most Wall Street firms have recovered, they aren’t hiring enough to make up for the tens of thousands of jobs lost and millions of square feet of office space they abandoned during the banking crisis in 2008 and 2009. Companies are still dumping big
blocks of space on the market, like the 500,000 square feet in the former headquarters of American International Group at 70 Pine Street.
[WSJ]

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70 Pine Street and Young Woo

More than 500,000 square feet of office space has just been put up for lease at 70 Pine Street, the former headquarters of AIG, the Wall Street Journal reported. An excess of unused office space in Downtown Manhattan resulted in more than 5.9 million square feet of space being added to the market during a 12-month period ending in April, according to Cushman & Wakefield. The asking price for the AIG space, which was purchased with neighboring 72 Wall Street for $150 million last year by Youngwoo & Associates, is between $33 and $35 a square foot. Asking rents are down 25 to 30 percent from what they were at the market’s peak, brokers said. Other large blocks of city space that have been vacated by financial companies are now available at 40 Wall Street, 85 Broad Street, 125 Broad Street and 77 Water Street. [WSJ]

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From the May issue: Last month, one of the market’s most reliable indicators showed that Midtown landlords are still suffering — even as brokers claimed the period of steep rent declines in Manhattan was over. The effective rent — a closely guarded slice of data that measures how much office leases are worth when free rent and other landlord concessions are factored in — fell in the first three months of the year in Midtown’s Class A buildings, after rising over the fourth quarter of 2009.
Many brokers saw the decline in effective rents as the last gasp of the recession, but others said prices might fall for the foreseeable future. [more]

Lower Manhattan, the country’s best-performing office market, is struggling to hang on to its title as vacancies mount. Though the Financial District fared relatively well during the commercial property slide, demand is no longer keeping up with increasing inventory. Goldman Sachs, American International Group and Bank of America are among the major tenants relocating, which follows the flight of firms like Lehman Brothers after Sept. 11, 2001. Goldman Sachs is moving to its new West Street building and vacating 2 million square feet offices including 85 Broad Street and 1 New York Plaza. AIG last year sold its 70 Pine Street and 72 Wall Street headquarters. Bank of America, meanwhile, is moving its employees into a new Midtown tower at One Bryant Park, and it remains to be seen what will happen to the World Financial Center offices of Merrill Lynch, which it acquired last year. Cushman & Wakefield expects Lower Manhattan’s vacancy rate to hit 14 percent by late next year — the highest since 1997 — and the 4.4 million square feet of office space planned for the two new towers going up at the World Trade Center isn’t helping that metric. “The amount of space that’s potentially going to come to the market will increase availabilities and put pressure on pricing,” said Kenneth McCarthy, who heads New York-area research for Cushman & Wakefield. [Bloomberg]

The commercial real estate market has shown moderate improvement quarter-over-quarter, but still not enough to compensate for the battering the industry has endured over the last year, according to a new report from commercial brokerage Eastern Consolidated. One bright spot in the report is commercial building sales performance among non-multi-family properties. Sales volume among those properties hit $1.08 billion in the third quarter, nearly double the $510 million seen in the second quarter this year. Even so, the report points out that this uptick in volume is due largely to the sale of two buildings, 825 Eighth Avenue and 70 Pine Street, rather than a broad-based improvement. The report is equally ambivalent on the subject of multi-family property sales. While the data “clearly indicates a turnaround in Manhattan multi-family sales,” the sales volume has much room for improvement. The third quarter saw 101 multi-family buildings closed, up from 66 in the previous quarter, while price per square foot inched up to $271 from $260. TRD [more]

The Manhattan multifamily and commercial sales markets showed signs of improvement in the third quarter of 2009, while the office leasing market continued to be plagued by an increasing inventory of inexpensive sublease space and a shrinking workforce, according to a report released by Eastern Consolidated today.
Sales of multifamily residential buildings in Manhattan increased, to 101 transactions totaling $392 million in the third quarter, from 66 valued at $254 million in the quarter earlier, the report said. The average transaction was valued at $271 per square foot, up from $260 per square foot in the second quarter. For commercial buildings, property sales volume was up to $1.08 billion from $510 million in the quarter earlier, though that number was largely driven by the sale of 825 Eighth Avenue for $605 million and 70 Pine Street/72 Wall Street for $150 million, two large transactions. TRD [more]

70 Pine Street, Young Woo, head of Youngwoo & Associates

The developer of 70 Pine Street in the Financial District predicts it will be able to sell residential condominium units in the tower of the American International Group building for $2,000 per square foot following a rehabilitation of the 63-story structure. Developer Youngwoo & Associates bought the Art Deco office tower and neighboring 72 Wall Street for $150 million, or about $105 per square foot in August, with financial partner South Korea’s Kumho Investment Bank. Young Woo, principal of Youngwoo & Associates, said the key to getting $2,000 per square foot was to market the building as a premium product, comparing it to a Louis Vuitton bag or an iPod. “If we can create that perfect trend lifestyle for this building, for our targeted audience, we are not afraid to achieve $2,000 a square foot,” Woo said. He added that units in his West Village condo, the Sky Garage at 200 11th Avenue at 24th Street, a building that includes an elevator for cars, sold for more than $4,000 per square foot. [more]

The New York Observer profiles Young Woo, whose Youngwoo and Associates
purchased AIG’s 70 Pine Street and 72 Wall Street earlier this month
for $140 million. Colleagues said that if any developer can succeed in
this market, Woo can. He started his first business, a sweater factory,
in Buenos Aires at age 16. He studied architecture at the Pratt
Institute and ended up bringing that background into real estate, and
has developed such buildings as the Chelsea Arts Tower on West 25th
Street and the condominium at 200 Eleventh Avenue. Woo is currently
competing against several other developers for Pier 57. [more]

Youngwoo & Associates and Kumho Investment Bank have agreed to purchase two buildings owned by American International Group, the 70 Pine Street headquarters, which could receive a landmark designation, and adjacent 72 Wall Street. The two Financial District buildings have a combined 1.4 million square feet of rentable space. The sale went into contract last week, according to a press release from CB Richard Ellis, which arranged the sale. The sale price was not disclosed. TRD [more]

AIG’s former headquarters at 70 Pine Street, which is reportedly close
to selling for $100 million, could become a landmark. The
president of the Landmarks Conservancy wrote to the city’s Landmarks
Preservation Commission asking to consider 70 Pine — an Art Deco
building designed by architectural firms Clinton & Russel and
Holton & George in 1932 — for landmark designation. Landmarks
spokesperson Elisabeth de Bourbon said that the commission has been
looking into landmarking the building for some time, and the next step
in the process is to talk to the new owner about designation. De
Bourbon said the commission has “authority to designate a building
without an owner’s consent. But we believe preservation works best when
there’s a dialogue and productive relationship with an owner.” [more]