Uncertainty in the financial market has begun slowing down a two-year rebound in the commercial real estate industry, the Wall Street Journal reported, with companies that had been looking for large chunks of office space now delaying their plans. As the article notes, fashion designer Tommy Hilfiger’s plans to convert the Metropolitan Life clock tower, a 1909 office building near Manhattan’s Madison Square Park, into a hotel and luxury condo collapsed this month after Hilfiger and his investment partner weren’t able to secure enough financing.

But some other investors say that the recent turbulence is not more than a bump in the road before commercial real estate values resume their upward march toward near-peak levels in areas such as New York and Washington. [more]

Well-leased commercial buildings in major markets may not be as profitable as
many commercial real estate investors believe they are, the Wall Street Journal
reported. According to an analysis by Costar Group, many leases in top
markets such as New York City, San Francisco and other areas are set
to expire next year. And because of the weak economy, tenants might be
demanding significantly lower rents than they otherwise would. In
Manhattan, Costar found that despite recent gains,
current office rents are still nearly 28 percent below their peak prices in
2008. The Real Deal recently found that office leasing in Manhattan was tightening [more]

Though the U.S. commercial real estate market is relatively strong despite an uneven economy, a mass of debt due to mature between now and 2015 gives reason for pause, according to a commercial real estate report issued today by Deloitte.

Activity has increased by just about every measure, according to the report, because of the abundance of distressed properties for sale, the growing availability of capital to finance stable assets and the growing share of funds placed in real estate investment trusts.

At the same time, it remains to be seen how commercial investors react to new government regulation, such as the Dodd-Frank Act and the Volker Rule. Moreover, refinancing is still risk because of the huge quantity of real estate loans scheduled to mature by 2015, largely held by banks already facing liquidity challenges. – Adam Fusfeld [more]

President Obama and Midtown Manhattan

Now that the debt ceiling has been raised and budget cuts have been agreed upon, the real estate industry’s focus shifts to how the new legislation will affect the commercial market. And according to Chris Macke, a senior real estate strategist at the CoStar Group, in an article for Forbes, that all depends on whether the economy has slumped because of a reduction in demand, or because federal spending has corporations concerned over forthcoming tax hikes.

If it’s the former, then the commercial real estate market could be in for a rude awakening. With the federal government spending $2.7 trillion less over the next decade, or $270 billion less per year, many private sector companies who do big business with the government will find their revenues slashed. In that case, corporate America certainly would not increase hiring and demand for commercial real estate would be stifled. [more]

Mary Ann Tighe, CEO at CB Richard Ellis

Women are increasingly finding professional opportunity in commercial real estate, according to a study commissioned by Commercial Real Estate Women and administered by the Cornell University program for real estate, Real Town reported.

There was a 7 percent increase in the number of women entering professions related to commercial real estate between 2005 and 2010, the report shows. Overall, more women in commercial real estate, about 11 percent in 2010, are earning between $100,000 and $250,000 per year. That’s a jump from only 8 percent in that bracket in 2005. In 2010, 31 percent of men were receiving that degree of compensation, down from 34 percent in 2005.
The number of women reporting less that $75,000 in compensation dropped from three times the number of men, to only twice the number. [more]

Recent data suggests that New York City’s economy is recovering more quickly than that of the nation, though not quite as quickly as Manhattan’s commercial real estate investment market, according to Sam Chandan, chief economist for Real Capital Analytics. Writing in the Observer, and citing the New York Fed’s Coincident Economic Index, a report that aggregates statistics relating to current economic activity in New York City, Chandan said the most recent recession was not as severe as the one that preceded it in 2001. This discovery contrasts with national statistics, which show a milder recession at the beginning of the previous decade. Comments

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The capitalization rate of Manhattan office buildings continued to decline in the first quarter of 2011 and now sits at a nation-wide low 6 percent, according to a PricewaterhouseCoopers survey of investors. The next lowest cities were Washington (6.48 percent), San Francisco (7.39 percent) and Los Angeles (7.44 percent).

The capitalization rate measures the rate of return on investment that a buyer can expect after one year of ownership. Manhattan’s capitalization rate in the fourth quarter of 2010 was 6.02 percent, and it was 6.65 percent during the first quarter of last year, Crain’s reported. The steady descent is indicative of an improving commercial real estate market. Investors’ returns decrease as real estate prices increase — a function of high demand in the commercial market. [more]

From the January issue: The long-standing divide-and-conquer mentality that has been the norm in
the New York City investment sales world is beginning to loosen —
well, at least a little.
With the recent uptick in building trades, commercial brokers say they’ve seen a rise, albeit slight, in co-brokering.
The practice — in which agents partner on deals — has long been
avoided and was a nonissue for much of the downturn because there were
so few transactions. But with the recent thaw in activity, coupled with
the fact that it’s still far harder to get deals done than it was during
the boom, brokers say the practice has become more appealing. [more]

New York City’s multi-family and office real estate markets have the best outlook of all major metropolitan regions in the U.S., according to commercial real estate services firm Grubb & Ellis, which released its 2011-2015 real estate outlook report yesterday. The city’s retail real estate market, meanwhile, ranked third behind Washington, D.C. and Los Angeles. Nationwide, Robert Bach, a chief economist with Grubb & Ellis, said that 2010′s better-than-expected performance will help spur recovery in 2011. TRD [more]

From left: Grubb & Ellis’ Vincent Carrega and Capin & Associates’ Timour Shafran

From the December issue: When Timour Shafran negotiated the sale of a Midtown building in August, the landlord threw out an interesting, if not entirely new, carrot. If Shafran, a vice president of investment sales at Capin & Associates, and his team secured a certain price, their commission would be bumped up almost two full percentage points — potentially tens of thousands of dollars. “Unfortunately, I got the lower number,” Shafran said. “But I killed myself trying to make it to the bigger fee.” Welcome to “incentive-based fees,” an increasingly common practice that is dividing the brokerage community in New York. The process is as simple as it is time-tested: Contracts, whether oral or written, are negotiated to include commission increases that are triggered when the broker achieves a certain price for the seller. [more]