The Real Deal New York

Increasing numbers of residential real estate agents are moving into the property development end of the business, which is an unexpected offshoot of a white-hot real estate market where almost anything sells, often at gasp-inducing prices.

There has been an “old guard” consulting with property developers and handling project marketing for almost a decade in New York City, including Helene Luchnick and Shaun Osher at Prudential Douglas Elliman. But now ranks of young Turks are entering the market.

The expanded role makes sense not only for individuals, but for brokerages as well. Dawn Tsien, president of Coldwell Banker Hunt Kennedy, says her company’s new development marketing division “provides developers with wide ranging expertise from market research, design review of floor plans and finishes, recommendations for other professionals such as attorneys, architects, designers and ad agencies – to create the right product for the right price for the target market.”

For some, getting in on the ground floor, so to speak, has paid off.

“A lot of brokers think there is a gold mine in development, and for some there has been,” said Leonard Steinberg, an Elliman agent making his first foray into development. “For others, it hasn’t been that lucrative.

“The first wave of residential brokers started consulting with developers around 1996. Before that, the market wasn’t ripe for that kind of work.

“From basically the mid-1980s until 1996, there was really no development, because interest rates were very high,” said Luchnick, an executive vice-president at Elliman who developed a property in 1981 by converting a Soho loft building.

She bought the structure housing her husband’s antiques store, converted it into lofts, including her own apartment of two decades, and sold the rest of the spaces. The experience was invaluable, she said: “I became knowledgeable about building department codes and how to get a certificate of occupancy.

“When the market turned in the mid-1990s, Luchnick took the plunge and consulted with a developer who converted the Spears Building into 30 lofts in West Chelsea, practically uninhabited at the time. She became the building’s marketing agent, initially asking $250 per square foot and seeing a price increase of 27 percent over the course of sales.

“We just didn’t know what reaction we’d get from the public, “she said. “It was an overwhelming reaction. I remember standing there on the opening date, there was no roof on the building, and it was pouring rain, and people were signing contracts.

“Now, about 20 projects later, she’s currently marketing Schaefer Landing, a condominium complex in Williamsburg consisting of 210 apartments being sold in two phases. The first phase of 75 apartments is 90 percent sold.

Osher, an Elliman executive vice president, also moved from traditional residential brokerage into development in the mid-1990s. He had sold a couple of commercial loft buildings, initiating him into property development.

The move “was a result of knowing what the market was, what buyers were looking for, and what developers should be building with respect to what the market is in need of,” he said.

Unlike Luchnick, Osher likes to work with developers to find sites or buildings ripe for development or conversion. Luchnick often consults with a developer before a purchase is made to present her vision of the best strategy for the property’s development. Both brokers handle the marketing of a property once it’s developed. Since the mid-1990s, Osher has done about 10 development projects, the latest of which, 260 Park Avenue South, still has six units available, but set records last September, with 50 percent of its 110 apartments sold in three weeks.

“Obviously, the benefits of this are, when you have a building you’re marketing, it’s like getting a lot of exclusives at one time, so you’re assured a certain amount of sales,” Osher said. “That’s why a lot of brokers are trying to get into this end of the business.

” While traditionally, developers sought to spend less than $300 a square foot for land costs and $200 a square foot for construction, recent purchases have obliterated those price points.

The record for the highest price paid in 2004 per foot of developable land was an astronomical $770 for Beth Israel’s Singer Division building and two adjacent apartment buildings at 170 East End Ave. The Zeckendorfs and partners bought the Mayflower Hotel and a vacant lot for $690 per buildable square foot.

Those kind of ingoing prices create a whole new level of risk for consulting brokers.

“You’ve got to speculate that down the road, which is at least two years away, hopefully people will be willing to pay the prices to not only cover those costs, but make a profit and allow for contingencies,” Steinberg said.

So veterans, while encouraged by the market, are cautious. They have advice to brokers mulling development work – Luchnick recommends focusing on one geographic area of the market – but they note that entering the field requires, aside from specialized knowledge, the assumption of extreme risks.

It may take two years for a developer to bring a development to sale. And even then, he or she could produce a shoddy development, and a broker’s name could be forever tied to it.

“You’re usually associated with the development that you represent,” Osher said. “If for some reason the developer delivers a substandard product, you will always be associated with that project.”

Another risk brokers assume is that the project may never be completed.

“You could spend two to three years on a project and never close,” Osher said. “The developer could declare bankruptcy, the buyers could be given a right of recision. That’s a very big risk.” All those risks sometimes prompt brokers to choke and undersell – which not only hits their pocketbooks, but can be a fate worse than death to their reputations.

“I’ve seen a lot of projects recently that have been sold at $850 a foot, where the market has borne $1,100 a foot,” Osher said.

“The risk is a broker underselling the project and ruining their reputation.” A market downturn could hurt agents who are newer to development. The income that comes from selling units in bulk in this market may not look so good stretched over the course of two years, Steinberg said, especially as the sales commission is typically lower when marketing a larger development.

“In a hot market like this, you can sell out a building in a few weeks,” Steinberg said. “In a down market, it can take two years.” Osher agreed that the inevitable market correction will separate the wheat from the chafe.

“In a strong market, when everything is selling, everyone is a genius,” Osher said. “In a market correction, the brokers who are experienced will bring to market properties that will sell in a good or weak market.”

“That’s where most of the people who are inexperienced will be flushed out of this end of the market.”

TRD

Forget about Leprechauns. Irish investors are finding their pot of gold on new shores these days.

As the country’s economy booms and the euro remains strong, Irish institutional and private investors are snapping up commercial and residential buildings throughout the United States, including New York City. One of the latest deals, closed in September, was Anglo Irish Bank’s purchase for $210 million of a 373,000-square-foot tower at 222 East 41st St. from the United Nations Pension Fund.

John Myers runs a three-year-old investment management business called Ceres Real Estate that helped bring about the deal.

“Ceres Real Estate was set up primarily with the goal of investing Irish capital here in the U.S., and we’ve done a number of transactions to date,” Myers said. “There is a good appetite from Irish investors for U.S. property.”

There have always been waves of foreign buyers in New York, with the Japanese the most prominent group in the 1980s, when they purchased Rockefeller Center, and in more recent years, the Germans. Investors from the United Kingdom have always been big players, and now it appears the Irish are poised to play a significant role in the market.

“We were kind of the pioneers of bringing Irish capital here,” Myers said. “We did the first deal about two years ago.”

That transaction involved buying into a large office complex in Boston as a limited partner alongside a well-known U.S. opportunity fund, he said.

Irish newspapers have reported that developers Garrett Kelleher of Shelbourne Developments, John Walshe, Aidan Brooks, the Kelly family, John McCabe of McCabe Builders and the McCormack family are all either investors or involved in property development in the United States.

Recent transactions in the New York City region also have involved a Dublin-based company called Warren & Partners, which, forming a joint venture called Willrich Holdings with Willet Cos. L.L.C. of Rye, N.Y., purchased 150 and 200 Meadowlands Parkway in Secaucus, N.J., for $30.3 million.

The same joint venture also set price records for suburban commercial real estate assets when it closed on 55 Railroad Ave. in Greenwich, Conn., a 131,630- square-foot office building, for $97.75 million or $743 per square foot in November.

Jeff Dunne, a vice president with CB Richard Ellis in Stamford, Conn., represented the seller and found the buyer in that deal. He said that besides the great exchange rate for Irish investors, the capitalization rate on U.S. properties the annual income expressed as a percentage of the property’s purchase price is higher and thus very favorable for European investors.

“Most of Europe is oversold, meaning it’s very difficult to get much of a return, and cap rates are lower,” Dunne said. “So America looks pretty attractive, both from an exchange rate point of view and a return point of view.”

Myers agreed, but he said the strong euro is not the primary reason for Irish investment in the United States. More importantly, investors are seeking to diversify.

“There’s a lot of interest out of Ireland, and it’s primarily driven by the need for diversification to get the money out of Ireland, out of Europe, and into dollar-based assets,” he said.

Even with prices for commercial space in Manhattan being some of the highest in the world after London, Paris and Tokyo, investors expect to see excellent returns.

“What’s interesting about investing in the States now is the anticipated economic recovery,” Myers said. “We all expect or hope the economy’s going to recover pretty strongly over the next four or five years, and putting money in now is a good bet.”

Columbus Circle and the new Time Warner Center are more than a pricey mall and a slow moving intersection. More permanently than Christo’s recent installation, they do double duty as unofficial urban gates — pass them heading north and you’re on the somewhat sedate Upper West Side. Pass them going south and you’ve waded into the cacophony of Midtown.

Since the Time Warner Center opened, the blocks to the west and north are poised for radical transformation. Development between Columbus Circle and Lincoln Center, which is itself slated for an upgrade, has given a previously unfocused neighborhood a community focal point and helped spark a residential apartment boom.

“You’re going to blink and all those garages will be gone and condos will be there,” said Abby Gellert, Halstead Property’s director of sales for Manhattan’s Westside. “The projects underway will change this neighborhood almost overnight.”

Besides Donald Trump’s seven towers on Riverside Drive, the neighborhood will soon be home to at least nine other condominium towers, ranging from 35 up to possibly 60 stories. Both the Empire and Mayflower hotels are being partially converted to condos.

Fordham University plans to more than double the size of its Lincoln Center campus, an expansion that would be financed partly by the sale or lease of two corner parcels on Amsterdam Avenue, which could become luxury housing.

Should the Fordham plan be realized, a high-rise quadrangle for 10,600 students would be created on the Columbus Avenue end of the superblock between 60th and 62nd streets, with seven new buildings around a 1.5-acre courtyard. This ensemble would be overlooked by two apartment towers, one of which could be as high as 60 stories.

Most of the other projects center around the intersection of West End Avenue and West 59th Street. In a change from the development pattern of many nearby condos, most of the soon-to-be-built towers will have bases featuring space for retail outlets and restaurants, helping to give the area some of the visual jolt and sidewalk life found in other Manhattan neighborhoods.

“This area used to be a bit of a slum,” said Rose Marie Laster, a vice president at Corcoran. “Now there are new shops coming and the Whole Foods in the Time Warner Center has had a big impact.”

These projects are becoming available just as demand for Upper West Side residences surges. According to Halstead Property’s monthly property report for February 2005, the number of new listings on the West Side fell 24 percent from a year ago. The biggest squeeze came among units with two bedrooms or more, which led to higher prices. West Side condo prices averaged $1.29 million in 2004, up 27.2 percent from the previous year, according to Miller Samuel appraisers. West Side co-ops averaged $877,000, up 11.7 percent from the year before.

“The biggest story on the West Side is the lack of product. Nothing is going on the market,” said Gregory Heym, chief economist for Halstead Property. “Our brokers say that right now the West Side is the hardest because there is nothing to sell.”

Other brokers agreed.

“There’s a real frenzy in this neighborhood,” said Antonio G. del Rosario, an agent for Citi Habitats. “Apartments that used to be on the market for weeks are now selling in a couple days.”

Rosario, who lived in a dorm room at the Julliard School in the 1990s, has seen the neighborhood behind the Time Warner Center and Lincoln Center change from a near slum to an appealing option. He attributes the popularity of the area to several factors: a spillover of young professionals unable to find apartments in Hell’s Kitchen, improved public schools, and of course, the Time Warner Center.

“With its restaurants, bookstore, and fresh food market, Time Warner did a lot for this neighborhood. It’s made living in the area a lot more convenient,” said Rosario.

Due to robust demand and developers’ desire to cash in on high prices, most new residential units will be condos rather than rentals, and will provide a much needed alternative to dealing with increasingly difficult coop boards in the area.

“Because of this incredible demand, one thing I’m noticing a lot is how much more demanding co-op boards have gotten in the last year,” said Gellert. “With the embarrassment of riches of buyers, boards are getting so critical that we sometimes joke that people couldn’t pass their own boards.”

Residential and Commercial vital statistics [more]

Several big deals sealed in Lower Manhattan in 2005 are shrinking the chasm between the Downtown and Midtown leasing markets as commercial rents prepare to climb throughout Manhattan.

The largest transaction in February took place Downtown when the law firm Fried Frank Harris Shriver & Jacobson signed on to renew and expand for 380,000 square feet at One New York Plaza.

Several other big deals, including Standard & Poor’s expansion by 66,000 square feet at 55 Water St., are putting Downtown on the map again, as vacancy rates for Class A office space in that market inched down from 13.4 percent to 13.2 percent, according to Colliers ABR.

“Downtown has really been where the excitement has been in the last 90 days,” said John Maher, an executive vice president at CB Richard Ellis. “A couple of other Midtown to Downtown transactions are in the works right now that are substantial.”

Downtown

Robert Sammons, director of research at Colliers, said he expected vacancy rates Downtown, below Canal Street and Chambers Street, to plummet even further, perhaps by one or two percentage points, in the coming March statistics.

“There are definitely some big blocks of space being gobbled up right now Downtown,” he said, referring specifically to Bowne & Co.’s 200,000-square-foot lease at 55 Water St. and the Securities and Exchange Commission’s move into 235,000 square feet of space at 3 World Financial Center.

Even though February’s statistics don’t necessarily reflect it, rents should start to soar in inverse relationship to dropping vacancy rates. Whether it’s a function of statistics or of more expensive prime space being snapped up first, leaving less expensive space in the inventory, apparent growth in rents can lag behind decreases in inventory.

Brokers on the ground say they’re seeing proof of escalating prices, from bidding wars to landlords raising the rents in the middle of transactions.

“I don’t think you’re going to see it from closed transactions yet, but the anecdotal evidence is rents are going up,” said William Shanahan, an executive vice president at CB Richard Ellis.

Midtown

Last month, the 1.1-million-square-foot Verizon building at 1095 Sixth Ave. was reportedly close to being sold, after a third round of bidding, for more than $500 million to Equity Office Properties, the Chicago- based REIT headed by Sam Zell.

Shanahan, who marketed the building along with Robert (“Mr. Big”) Alexander and Darcy Stacom, said he couldn’t comment on the deal. But other brokers are watching it closely.

“It’s going to be a very exciting bellwether of the market to watch from the time they select the owner to the time that they lease it out,” Maher said.

Midtown saw some substantial deals clinched in February, from Polo Ralph Lauren’s expansion by 195,000 square feet at 625 Madison Ave. to Citibank N.A.’s lease for 176,000 square feet at 731 Lexington Ave. The class A vacancy rate in Midtown continued to fall, to 8.3 percent from 8.4 percent in January, according to Colliers. The average asking rent wriggled upward to $57.15 from $57.10 per square foot.

Sammons said two ends of the market are seeing heavy activity.

“There’s pressure on the large blocks of space that are disappearing due to financial services and law firms,” he said. “And on the other end, with the small boutique firms, hedge funds and the like, taking the really expensive, high-end spaces on Park Avenue.”

But one factor still irking some market researchers is the lack of job growth to support an avalanche of leasing carried out by financial services companies, law firms and business services firms.

“That’s what everyone’s wondering,” Maher said. “Where are the jobs to support this activity?”

Some believe financial services firms, which cut themselves to the bone in the downturn after Sept. 11, 2001, are leasing to get current employees out of cramped quarters and in anticipation of future hiring over the course of the year. And those firms, along with law firms, are hedging against future rent increases.

“It takes a year from the time you start thinking of space to the time you can actually get somebody in there,” Maher said. “So people are acquiring space for a year from now.”

Midtown South

Colliers found the Class A vacancy rate in Midtown South was 6.7 percent in February, down from 7.2 percent the month before. Those vacancy numbers are significantly lower than Downtown and Midtown because Midtown South has a much smaller stock of class A space.

A separate report by Newmark, using 12- month projected availability rates, found Midtown South, from Canal Street to the mid-30s, is thriving. Newmark discovered that Midtown South’s rate inched below Midtown’s in February, declining from 10.9 to 10.5 percent. It has not dropped so low since June 2001.

“This is a healthy market,” Maher said. “Tenants have alternatives if landlords get greedy, and landlords don’t have to give away the store, because there are plenty of tenants out there.”

Wal-Mart and BJ’s Wholesale Club recently shelved plans to set up (giant) shop in Queens and the Bronx, respectively, which might lead casual observers to predict that New York City has shut its doors to national chains with stores the size of city blocks.

But national chains say they’re not giving up, despite pledges on the part of labor unions and smaller store owners to fight big box retailers. Retail real estate brokers say the reward is too great for big box stores to reject New York City altogether, especially after the way has been paved in gold by other national chains that have opened throughout the five boroughs. Big box retailers are here to stay.

“It used to be that national companies wouldn’t come to New York –they couldn’t pay the rents,” said James Buslik, a principal with Adams & Company, who recently brokered a deal with P.C. Richard & Son on West 23rd Street in Chelsea. “Then they learned that they could do the volume here, so they came.”

One of the first national chains to enter Manhattan was Kmart, which opened its doors at 770 Broadway at Astor Place Hope Consolo, chairman of Prudential Douglas Elliman’s retail leasing and sales division.

There was plenty of neighborhood opposition, but Consolo maintains that the store ended up helping nearby smaller retailers. “Once [Kmart] was in the neighborhood, they realized that the big box generated a lot of business and actually brought great traffic and helped invigorate areas of the neighborhood.”

Now there are two Kmarts in Manhattan, and in the past year, Home Depot opened a pair of stores here, including one on West 23rd Street, which Consolo asserts is a burgeoning residential area due to its big box retail.

“There are neighborhoods created around big box retail, and Ladies’ Mile in Chelsea is one of them,” she said. “And you saw the spinoff, because Ladies’ Mile was so successful. We brought Bed Bath & Beyond, Filene’s, TJ Maxx and Burlington Coat Factory. So when Home Depot wanted to choose a space, they chose 23rd Street near Ladies’ Mile.”

The store there, which opened this past September, as well as the more recent Home Depot store which opened in the Bloomberg Tower on East 59th Street, thrive because retailers learned their market, which was urban and sophisticated, said Don Harrison, a company spokesman. The 23rd Street store is stocked with lighting fixtures, door pulls, paints, flooring and throw rugs, along with 24-hour locksmith services, to serve a Manhattan market looking for easy ways to give apartments a quick makeover, Harrison said. “You study the market first, do the focus groups, and you understand the customer you’re serving, and only then do you open the store,” he said. Home Depot stores in Manhattan learned quickly from focus groups to offer the very best same-day or next-day delivery service, Harrison said.

“Manhattanites are inclined to have a lot of stuff delivered since they don’t drive — everything from a hamburger to a dinette set,” he said. It may require spending precious time to find a site structured for deliveries and making other concessions to the market. That’s a far cry from when the former Bradlees department store once opened on 14th Street, blithely offering a ground floor full of lawn furniture, said Jeffrey Roseman, an executive vice president at Newmark New Spectrum Retail.

Big box retailers face obstacles: they need huge footprints, sometimes 100,000 to 150,000 square feet of space, which are almost impossible to find in Manhattan. Retail brokers are torn over whether recent mergers in the retail industry might open up space. Consolo said all the spaces that could potentially be opened by the mergers of Kmart and Sears, or Federated and May department stores, are already spoken for. Buslik doesn’t agree.

“There may be existing retail space that becomes available,” he said. “If it came up, it would be gobbled up.”

Besides space created by mergers, normal turnover can be counted on to open up some space.

One building attracting interest is the 1.2-million-square-foot St. John’s Center, at 340 West St.

But not all retail brokers think it’s a viable location for big box retail, since it sits in a prime location on the Hudson River. “New big box retail has to go to old industrial space,” Buslik said. “The problem is it will compete with the possible tear-down and building of new residential space. You have views of the water here. Do you want to build retail or create high-rise residential, which seems to be the shining star right now?”

Given the difficulty of finding scarce Manhattan locations, the indications are that neither Wal-Mart nor BJ’s Wholesale have written off the outer boroughs for store locations.

In February, a City Council panel had rejected an application from BJ’s for zoning changes they needed to open a store, with some reports saying organized labor had intensely lobbied lawmakers to deny the changes. BJ’s pulled the plug on their application before it went to the full council.

Wal-Mart spokeswoman Mia Masten said that the company may have been rebuffed in Rego Park, Queens, but it remains interested in finding what would be its first New York City location. Vornado Realty Trust dropped plans to include the store in a shopping center complex it is planning, also in February, after community and union opposition.

Used to be, a little ownership went a long way: Saks’ vaunted Fifth Avenue building became an emblematic part of the department store’s identity. But for years, the cutthroat conditions of Manhattan retail real estate a massive influx of retailers, the need to stay ahead of soaring rents, and shifting neighborhood economics pushed companies toward securing long-term lease arrangements rather than purchases.

A few recent bold acquisitions by retailers, including Custo Barcelona and LVMH, have encouraged building owners to cash in on high prices and offer their spaces as retail condos. Historically low interest rates and fears that the era will end soon are also making it easier for retailers to be buyers of buildings.

In January, Robert K. Futterman & Associates sealed the deal on 240 Columbus Ave. for Custo Barcelona, giving the European clothier a nine-unit residential building and a prime second New York location with 1,500 square feet of retail space. The clothing manufacturer acquired the building from previous owner Del Corral Holdings, and will not be able to move into the retail space until the previous tenant’s lease expires in 2006.

“In most parts of Manhattan, it’s hard because there are fewer retail-oriented buildings,” said Barry Fishbach, executive vice president at Robert K. Futterman & Associates. “Retail is such a small part of most buildings, so it’s harder for an owner to buy.” Fishbach cited Harlem particularly 125th Street as an area in Manhattan with high rates of ownership compared to leasing.

But in the heart of Manhattan’s luxury district, the new owners of the Plaza Hotel are betting that they can find a buyer for some of the city’s most expensive retail space which rents for as much as $1,440 a square foot. As reported in March’s issue of The Real Deal, Elad Properties has discussed converting between 150,000 and 160,000 square feet into a custom- built space for a high-end retailer, though the company has not yet located a buyer. In what could indicate a trend in the making, Elad also sold a 10,000-squarefoot retail space last summer at 21 Astor Place, a new residential development. A group led by investor Eli Gindi bought the space for $13 million.

In the luxury bracket, another major move was LVMH’s February 2003 purchase of 1 East 57th St. at Fifth Avenue, where they installed a Louis Vuitton store one of LVMH’s key brands replacing the Warner Brothers Studio store that had leased there previously. The deal, arranged by Colliers ABR, helped to reaffirm the north side of 57th Street as a luxury retail district.

Fishbach is quick to remind that national and international tenants are far from the only prospective buyers in the city. “For national tenants, it’s the exception,” he said. “But for local and entrepreneurial retailers, it’s their preference. They can build up equity in their property and be sure that their rent’s not going up. In the boroughs, it’s common.”

He cited businesses such as Jimmy Jazz and Dr. Jay’s as regional retailers who prefer to own many of their properties. “Lower interest rates have raised the price of investment properties,” said Fishbach. “It has priced many buyers out of the market. It is definitely a seller’s market, whether in Manhattan or the boroughs.”

One industry that used to account for a large number of property purchases banks has recently gone the way of the lease. With many consumer banking chains seeking to have convenient locations citywide, banks are jostling for some of the city’s most coveted retail leases. “They’re really competing over spaces,” said Fishbach. “If they were as committed to purchasing as they used to be, they wouldn’t be able to get the properties that they have today.”

As developers cash in on lucrative hotel-to-condo conversions, the number of hotel rooms in New York is shrinking, even as hotel occupancy in the city is likely to peak in 2005 after several slow years.

In order to make up for the shortfall, developers are looking to the rezoned Hudson Yards area as a location for new hotel construction, simply due to a lack of alternative development sites.

The slow leak of hotel rooms from Manhattan doesn’t yet have hotel industry experts running around like Chicken Little, but they warn that there could be high-season shortages.

At the end of 2004, there were 62,000 hotel rooms in Manhattan, and about 70,000 in all of New York City. But in 2004, about 1,305 rooms were lost due to five hotel closures, while only 452 rooms were added due to the addition of four hotels, says John A. Fox, senior vice president at PKF Consulting, which specializes in hotels.

“While the loss of hotel rooms is not insignificant, it’s not at the level where we’ve got a dire shortage,” Fox says.

Fox’s statistics don’t include condo conversions, which would up the number considerably. Legendary hotels like the Pierre and Carlyle have been selling apartments for years, while The Plaza, Stanhope, St. Regis and Sheraton Russell hotels have become the latest adherents to the trend.

The old Windsor, Empire and Gramercy Park hotels are reportedly converting rooms to condominiums. The Inter-Continental Central Park South, Regent Wall Street, Barbizon and Olcott all are transforming multitudes of hotel rooms into apartments.

The Mayflower was torn down completely to make way for highrise luxury apartments. And there have been reports of a plethora of other hotel conversions, though at least one report was erroneous.

The Plaza Athenee has no plans to convert any of its hotel rooms, Fox says.

Yet Manhattan may not be completely devoid of new hotel sites. Some are promoting the Hudson Yards area on the island’s far West Side.

Hotel industry experts say there’s no question hotels will go up in the Hudson Yards area, but the unknown is when.

“That area is under-hoteled, in general,” says Art Adler, managing director at commercial brokerage Jones Lang LaSalle. “The question is when should hotels be developed over there. Should it be now? Or should it be when there’s more commercial development over there?”

“Usually, hotels follow, not lead, commercial and tourism development,” he says.

In the Hudson Yards area, a new hotel with about 1,500 rooms has been zoned as part of the expansion of the Javits Convention Center. If developed, it would be a destination in itself, much like the Marriott Marquis in Times Square, Adler says.

But Fox says the Javits hotel was not a done deal and no developer had been selected.

“I don’t think you’re going to get somebody to come in and do that without some kind of incentives,” he says.

Also in the Hudson Yards area, there is potential for construction of a hotel as part of the new Penn Station redevelopment, Adler says.

Currently under construction in Hudson Yards is a 188-room Holiday Inn Express at 29th Street between Seventh and Eighth avenues, which is scheduled to open in the third quarter of 2006, says Monica Smith, corporate communications coordinator for InterContinental Hotels Group.

Rumored to be in the works are a Holiday Inn at 39th Street and Eighth Avenue and a Wingate Inn on 35th Street between Seventh and Eighth avenues.

Most industry experts feel that the Hudson Yards area might be appropriate for smaller discount hotels.

“If you’re coming to New York, you want to stay on Eleventh Avenue?” asked Eric Anton, senior managing director at Eastern Consolidated Properties, a commercial investment banking firm. “Not really. Unless maybe you’re driving in, and it’s convenient. I could see a lot of smaller projects, like Motel 6′s or Howard Johnson-type hotels” in Hudson Yards.

Adler agreed, predicting the development of a couple hotels to serve spillover from Times Square during high season, which is the fall, holidays and spring.

“A Holiday Inn, for example, that’s priced well would do very well, because certain elements of demand aren’t as price sensitive,” he says. “You’re not going to see luxury hotel development there.

Commercial properties recently placed on the market [more]

An unexpected surge in rentals in February has brokers wondering why sales haven’t kept pace, and the principal suspects are a lack of sales inventory, astronomical prices and gradually increasing interest rates.

Several residential brokers said they’ve noticed an atypical uptick in rentals. Noah Freedman, president of BOND New York, cited a 20-percent increase in rentals over March 2004 numbers. The spring rental season doesn’t normally get into gear until April, he said.

“I expect rentals to increase between 10 to 15 percent by the summer,” Freedman said.

Some brokers attributed the unanticipated interest in rentals to frustration with a residential market where bidding wars are increasingly vitriolic and creeping long-term interest rates may be making the idea of purchasing less attractive.

“Rentals have gotten pretty hot in the past month,” said Andrew Barrocas, a broker at The Real Estate Group, a new company founded by several ex-Citi Habitats brokers. “A lot of people are getting discouraged in the sales market, are getting outbid and are alternatively turning to the rental market.”

Kirk Henckels, director of Stribling Private Brokerage, indicated brokers in the luxury sales market have noticed the anomaly.

“The rental market has definitely come on strong,” he said. “I attribute that to lack of inventory and the price increases. And certainly interest rates, which determine whether it’s cheaper for them to buy or rent.”

If a lack of inventory is to account for a move toward rentals, it also may explain another recently identified phenomenon at the high end of the market.

Many of the late 19th- and early- 20th century mansions that line the rarified avenues of the Upper East Side have been scooped up by families for prices ranging from $15 to $20 million after being monopolized for decades by nonprofit organizations, elite clubs and diplomatic missions.

“It’s true because we’re out of inventory of very large cooperatives, certainly on the East and the West Side,” Henckels said. “There’s so little to sell. If you want 8,000 or 10,000 square feet, you have a serious problem. So this lack of inventory will buoy a townhouse market, where there is still some existing inventory.”

Still, more and more for-sale apartment units will most likely be coming on the market in anticipation of the spring season.

Analysts expect inventory rates, which hit a low in recent months at 3,922 units in December, to trend upward in March, though February saw a decline of 2 percent, said Jonathan Miller, president and chief executive officer of real estate appraisal service Miller Samuel Inc.

Henckels said “bigger is better” in the current market, especially as buyers are looking for deals now in anticipation of interest rates burgeoning though watching for this has been a bit like “Waiting for Godot,” he joked.

One group cashing in on cheap money is foreign buyers. They are creeping back into the market, Henckels said.

“There’s been talk that there are a lot of Russians in town, finally,” he said. “People are starting to see more foreign buyers, but that is long overdue.”

Miller said foreign buyers comprised about one-third of apartment buyers in Manhattan in 2004 and that trend is continuing in 2005.

A strong euro, cheap air travel, and the absorption of weak currencies in European countries united by the euro have made it viable for foreigners to buy in the United States while the dollar is limping along.

“The market that’s affected by them is the condominium market,” Miller said. “And that’s largely been the new product that’s come on line.

” Wall Street bonus purchases continued to drive the frenzy on the upper end of the market into March. When bonuses are good, they filter into the real estate market like clockwork in the first and second quarter of the year, Miller said.

“We’re seeing it at the very high end, with purchases over $5 million,” he said.

Many of those purchases are being made Downtown, where the Real Estate Board of New York recently found that the $667,000 average condo sales price below 42nd Street exceeded the average price Uptown. South of 14th Street, prewar condos surged to a median price of $1.275 million.

Some brokers discounted that data since it didn’t include co-ops, but others called it part of a trend toward airy loft spaces, especially among baby boomers.

“I call it the Mini Cooper effect,” said Doug Magid, CEO of Century 21 William B. May. “The same people who are bringing back their youth by saying, ‘Wow, this Mini Cooper reminds me of the ragtops of the past,’ are those looking to be hip and trendy and maybe youthful in Soho, Tribeca, the Village, Chelsea.”

“I’m not surprised to see the condo market is burgeoning because of it,” he said.

Miller agreed, though he said his price per square foot data doesn’t quite show that condominiums Downtown have overtaken those north of 42nd Street.

However, prices throughout the Manhattan residential market are equalizing, he said.

“The Downtown market is growing because of the loft market,” Miller said.

“If you look at the three price averages of East Side, West Side and Downtown, there’s not a lot of difference, so we’ve become almost a more homogenous market in terms of prices.”

The rapid ascent of property values in Brooklyn may be enabling residents to cash out and use their profits for a place in one of Manhattan’s start-up neighborhoods.

Ted Karagannis, a broker with Bellmarc Realty, said he’s handled about eight clients in the past two months who have moved from Brooklyn to Manhattan, with many heading to the Lower East Side.

“Everyone wants to live downtown,” Karagannis said. “People are moving back from Brooklyn to live downtown, which is interesting.”

“A lot of them bought out there, maybe five years ago, because they couldn’t afford the city. And because Brooklyn’s so strong now, they’re selling to buy something in the city, which they can now afford.”

Because a few Brooklyn neighborhoods such as Park Slope, Dumbo and Brooklyn Heights are now more expensive than some areas of Manhattan, including the far Lower East Side, Murray Hill, parts of the Financial District and Midtown West, the equation makes sense for folks who seek a Manhattan home.

Karagannis said the Brooklynites he sees moving back to Manhattan are focusing on the Lower East Side, specifically, around Grand Street and Alphabet City. “And the Village is the Village — it’s always in demand,” he said. The clients are in their late 20s and early 30s, he said.

“Six years ago, they were buying spaces in Brooklyn for $75,000 or $150,000, and now they’re able to turn those things for $300,000 to $400,000,” he said. “So that’s really allowing them an entry-level apartment in the city.”

That has worked out well for Karagannis. But other brokers, while intrigued and acknowledging that the trend seems logical, said they haven’t seen it yet.

“I can believe that, but it’s not that they’re spending less money in Tribeca– or wherever — than Brooklyn,” said Ingrid Johnson, a Manhattan-based broker with Brown Harris Stevens who lives and does business in Brooklyn.

“They’ve also gotten to a different spot in their own career — their incomes have gone up to where they can put more money into their purchase.”

That means property appreciation isn’t the sole reason that would account for a client’s leap back to Manhattan. Johnson said she worked with clients more than a year ago who had a dream of living on the Upper West Side and were able to do so through wise investment and renovation of Brooklyn Heights apartments.

“They purchased, fixed up, sold; purchased, fixed up, sold; purchased, fixed up, sold,” she said. “Now, they can afford the Upper West Side.”

Johnson said she had other Brooklyn clients who wanted to purchase in Tribeca, but never did. They ended up renting. And another Brooklyn client got divorced and chose to move back to a Manhattan neighborhood she believed was likely to appreciate in value. Marilyn Donahue, a Brooklyn specialist with Prudential Douglas Elliman, said the only Brooklyn clients she’s seen move back to Manhattan have been downsizing their families.

“In fact, what they are buying are $3 million to $4 million lofts or apartments,” she said.

However, most Brooklynites, when choosing to upgrade their real estate, stay within their own neighborhoods instead of leaping to another borough, she said.

Robert Krieger, a broker with The Corcoran Group, said he’s had only one client sell in Brooklyn to move back to Manhattan and, in that case, rent. The lack of inventory in Manhattan would seem to drive buyers in the opposite direction.

“There’s still a supply-demand problem,” Krieger said. “There’s still not enough supply for all the people who need apartments. So there’s still an exodus going on from Manhattan.”

If Brooklynites returning to Manhattan to buy in start-up neighborhoods isn’t a bona fide trend today, it’s in the offing. “It is logical,” said Jonathan Miller, president and chief executive officer of real estate appraisal firm Miller Samuel. “If you bought in Brooklyn seven years ago, and you sold today, those people would realize significant profits.”

And, in fact, there is anecdotal evidence, though no hard statistics to suggest that some buyers are returning to Manhattan, Miller said, but the cases typically involve Brooklynites who have seen income gains.

“People are leveraging the profits they’ve made in Brooklyn, and they’ve moved further along in their careers and have more income,” he said. “And then they’ve moved back to Manhattan.”

Growing numbers of New York area first-time home buyers are looking further afield in their quest to build up home equity, sometimes staying on as urban renters while playing suburban landlord at the same time.

Savvy young couples are seeing that strategy as a way to sustain their city lifestyles while joining the rest of the country in home ownership, which is tougher and tougher to do in a pricey urban market.

Joanna Pajkowska and her fiance pay $2,500 a month for their one-bedroom apartment in Battery Park City, and that’s a comparative bargain. She says the rent will likely increase when incentives established after Sept. 11 expire in spring.

They love the neighborhood – but don’t see it as a permanent residence.

“It’s just too expensive,” said Pajkowska, a graduate student. “I’ve noticed there are quite a few young families with one or two young kids, but for us, I don’t think it’s doable.”

Instead, Pajkowska’s fiance owns a home in Connecticut that he rents out to cover the mortgage. The couple intends to stay in the city for about two years to enjoy the lifestyle, and then they’ll settle down – somewhere else.

“You can do that, because then you don’t feel guilty about throwing your money out in rent,” she said. Pajkowska said she knows another couple, soon to be married, who intend to do the same thing.

Though some mortgage lenders, such as Melissa Cohn, president of Manhattan Mortgage Company, say they haven’t seen many instances of this phenomenon, others say some groups are giving the trend momentum.

Teresa Donohue, a vice president with the New York Mortgage Company, said many Asian buyers opt for the rental-ownership mix. “There have been a number of young couples saving and waiting to buy homes in New York, but the prices keep going up,” she said. These clients have started exploring two communities in Pennsylvania – Mayfair and Castor Gardens – as well as Norwich, Conn., close to the popular Foxwoods and Mohegan Sun casinos.

“We’ve financed several investment properties and second homes there because people are buying great little places ranging from $110,000 to $140,000,” Donohue said. “They’re getting a nice rental income off them.”

These couples still live in New York, and are waiting to see what develops in the communities in which they’ve purchased, she said.

Despite the prevalence of these types of buyers in urban areas, most residential real estate brokers say they’re labor-intensive and to be avoided. But some real estate experts believe agents can capitalize on this type of situation – especially as these buyers may make multiple purchases.

Typically, New York brokers will refer buyers looking outside the tri-state area to local agents, often negotiating a referral fee of 15 to 25 percent of the commission on the gross sales price. If the New York City broker handles the loan and the closing with a local lender, he or she may be able to negotiate a significantly higher referral fee rather than the typical 15 to 25 percent.

Brokers in different areas often form alliances. Carol Dorado, a broker with Century 21 Wolff Real Estate in White Plains, often receives referrals from Bellmarc Realty in Manhattan. She said she has dealt with buyers who want to purchase even farther away than Westchester.

“You’re usually looking at younger people, 27 to 35 or so, who do work in the city and have their lives there, and maybe got married recently and are starting to have a family,” she said. “A lot of times, I’ll try to send them to Atlanta, Florida, Chicago, Connecticut, Massachusetts. I know real estate agents there, so I’d refer them to someone that I know.”

Bernice Ross, chief executive officer of RealEstateCoach.com, said brokers should exercise caution when doing business outside their realm of expertise, and that referrals are the wisest path outside the city.

“Don’t do business outside the area – that’s a formula for a lawsuit,” she said.

Beauty is in the eye of the beholder, which makes a flattering camera lens a vital tool in selling real estate.

Whether one takes photographs oneself or hires a professional, in today’s real estate market, photos can cinch or sink a sale.

Kim Shephard-Fabrizi, a broker with Prudential Douglas Elliman, invested several hundred dollars on professional photo editing software including Adobe Photoshop to give polish to photos of middling quality, or shots taken in gloomy weather.

“I taught myself,” says Shephard- Fabrizi, who got into the real estate business 11 years ago. “Photographs didn’t use to be as important. We used mostly the newspaper. But with the Internet and technology it is essential to have quality photographs. It sells an apartment without a doubt.”

Shephard-Fabrizi says more real estate professionals are turning the photo business over to professional photographers specializing in architecture and real estate, to help make even the most mundane studio appear straight out of House Beautiful.

When it comes to making the choice for her properties, Shephard- Fabrizi says, “It depends on the price range of the apartment. A million dollars or above, I will hire a professional. Under that I do it myself.”

While many brokers still take their own photographs, some companies, such as the Downtown Manhattan office of Sotheby’s International Realty, assign an energetic staff member with an eye for visuals to take photographs for their listings.

“We are not just giving each broker a camera. Because there is an art involved. Some people are just better at visualizing a space, and taking better pictures than others,” according to Diane Levine, Downtown brokerage manager for Sotheby’s.

She says using a professional has become a part of doing business, saying, “In the luxury market, more often it is the professional photographer who is taking the photographs.” Professional photographers charge between $500 to $3,000 a day, and the cost is usually assumed by the brokerage, which also springs for any printed material such as brochures.

Beyond the luxury market, even some brokers selling less expensive units seek the same level of quality for their photographs. David Feldman, a broker with Citi Habitats, sells mostly inexpensive apartments in the Bronx. On all of his exclusives, Feldman uses the services of listings information company On-Line Residential. For a fee, the company will take digital photographs of a space and stitch them together to create a 360-degree panoramic, resulting in a “virtual tour” of a particular space.

“It’s great. I pull still photographs from the virtual tour, and use both (digital photographs and the virtual tour) on my Web listings,” Feldman said. “It’s worth the extra money. A lot of times people say, ‘I saw those pictures. This apartment looks incredible.’ It’s really what’s attracting them to my listings.”

Exterior impressions are sometimes just as important as dazzling interior shots, so commercial and residential real estate firms often hire architectural photographers.

Beth Green, a photographer who specializes in real estate and architecture, often works for real estate firms trying to showcase the value of their properties.

“You can take a building in the worst part of town and still find some beauty in it with a knowledge of composition and lighting,” says Green, a 30-year veteran who charges an average of $2,000 a day for exterior photography.

Jonn Coolidge, a Los Angeles- and New York City-based photographer specializing in interiors, says lighting is critical when taking pictures. “The goal is to capture the essence and style of a space and elevate it,” says Coolidge. When it comes to photographing interior spaces, he offers the following tips:

Use professional interior design magazines as a reference

Find inspirational images, and look at how professional photographers approach a space

Look for unique angles from different vantage points

Capitalize on great lighting

Edit or reduce clutter caused by furnishings.

Chelsea
165 West 18th Street
The Angel Group is building a 12-story condominium tower. It is the first Manhattan project for the Brooklyn-based developer.

Flatiron District
4 West 21st Street
A 17-story, 62-loft apartment building designed by architects Hugh Hardy and Ariel Fausto is planned for a parking lot off Fifth Avenue. The 93,000-square-foot structure, scheduled for completion in early 2006, will include 105 parking spaces.

Flushing
129-43 Northern Boulevard
Boymelgreen Developers is planning an 18-story, mixed-use project on the site of the former RKO Keith’s Theater in Flushing. The project will restore the theater and top it with 200 condominium apartments. Prices are expected to be in the $500 per square foot range. The project reportedly got a warm reception at a land use hearing at Queens Borough Hall last month, the Daily News reported.

Garment District
1 East 29th Street
The Church of Transfiguration recently sold its air development rights to The Clarett Group. The developer is planning a 50-story condominium tower with three apartments per floor, designed by Fox & Fowle Architects.

Greenwich Village
70 Bethune Street
The Related Companies has filed plans with the city’s Department of Buildings to construct the tallest tower on “the Gold Coast” stretch of West Village waterfront. A 20-story, 104-unit building is planned on the site of the Superior Ink factory, which would be demolished. The project would include retail and underground parking.

Hudson Square
255 Hudson Street
Metropolitan Housing Partners is building an 11-story, 64-unit building, one block away from their sold-out 505 Greenwich St. project. Construction began in January and the glass-façde building is being designed by Handel Architects. The exclusive sales agent for the property is Corcoran.

Midtown
Centria
16 West 48th Street
JD Carlisle Development Corp. will create the first luxury residential condominium in Rockefeller Center, the Post reported. The 34-story, 150-unit curtain wall building will be designed by Perkins Eastman Architects with interiors by Philip Koether. The Marketing Directors is the sales agent for the project.

Midtown
Place 57
207 East 57th Street
Construction has begun on the 36-floor, 68-unit glass building designed by Ismael Levya Architects. The project will feature a lobby and garden designed by Vicente Wolf. The Clarett Group is the developer. Occupancy is slated for early 2006.

Midtown
421 West 54th Street
The Hit Factory, the famous recording studio, sold for $17.5 million and may be coming back as a luxury residential condominium. The new owners of the property include Manhattan-based Valhal Corp.

Tribeca
31-33 Vestry Street
Developer Charles Dunne plans to build a nine-story residential building designed by architect Winka Dubbeldam. The original design called for a modern, glass and stone building with a “glowing” stone laminate façde. The Landmarks Preservation Commission sent the developer back to the drawing board after reviewing the plans in February, the Downtown Express reported.

Construction Update

Williamsburg
351 South 3rd Street
The foundation has been laid for the four-story multifamily building designed by Scarano Architects, which is working on more than 100 projects in the area, according to a recent story in the Times. The elevator building has nine loft-style units, including three duplexes, two triplexes, and two units with double-height ceilings and interior mezzanines. The designer and project manager is Lilia Sodre. The developer is Park Avenue Management.

Sales Update

Midtown
The Plaza Hotel
Developer Elad Properties announced that Cantor & Pecorella will serve as special marketing consultant for the hotel’s planned 200 condominiums. Stribling Marketing Associates is the exclusive sales and marketing agent for the condos. An on-site sales office is expected to open in mid- June. Contact: Rosita Sarnoff, 212-585-4542.

Midtown West
The Helena
601 West 57th Street
The 38-story, 600-unit rental tower started leasing units in February with tenants first scheduled to move in last month. Developed by the Durst Organization, the environmentally sensitive “green” building offers studios and one and two-bedroom homes at prices ranging from $1,800 to $5,000 per month. Amenities include a 24-hour doorman and daytime concierge, shuttle service to the Columbus Circle subway station, fitness center and health club. Contact: Debra Derella-Dheren, 212-262-6500, or visit thehelena.com.

New Developments from Previous Months

Atlanta

Residential/Commercial
In the city’s most ambitious mixed-use venture of the year, Cousins Properties purchased 9.9 acres in Buckhead, and plans to develop a two-phased, 31-story development with 1.5 million square feet of office space, at least 60,000 square feet of street-level retail and restaurant space, and 800 residential units. Groundbreaking is scheduled for May. Completion of the first phase is anticipated in April 2007.

Boston

Residential
Roxbury is on the cusp of a revival, real estate agents say. While perceptions of the neighborhood as a crime-ridden area still linger, soaring Boston housing costs are driving first-time buyers to Roxbury as an affordable alternative. The 2004 median sale prices in Boston’s downtown neighborhoods were $1.26 million for a single-family home and $463,000 for a condo, according to the Warren Group. For Roxbury, the medians were $370,000 for a single-family home and $399,000 for a condo, the Boston Globe reported.

Chicago

Residential/Commercial
The Chicago Board of Alderman last month approved zoning for Riverside Park, a $1.5-billion, 62-acre mixed-use community in the South Loop. The project will be located on undeveloped land along the south branch of the Chicago River south of Roosevelt Road. It will eventually include 4,600 units priced from $200,000 to $3 million, with marketing on the first phase to begin this summer, according to Realtor.org.

Commercial
The newest office buildings in the city are getting substantially higher rents than older trophy properties. The average net rent in top-quality office buildings constructed since 1999 is $20.42 per square foot, nearly 20 percent more than their rivals built between 1969 and 1978, according to a report by Torto Wheaton. Trophy towers built between 1969 and 1978 include the city’s best known skyscrapers, the Sears Tower and the John Hancock Center, the Chicago Tribune reported.

Residential/Commercial
After considering a plan that would have made his building the nation’s tallest, Donald Trump scaled back plans for a decorative spire atop his 90-story Trump International Hotel & Tower under construction. Mayor Richard Daley had supported a plan to extend the spire, but Trump eventually decided to go with the original spire because it looked less awkward, he said. The project will be about 90 feet shorter than the 1,450-foot-tall Sears Tower, the Chicago Tribune reported.

Las Vegas

Commercial
If Seattle has Bill Gates as its local tycoon, Las Vegas has Kirk Kerkorian. The MGM Mirage majority shareholder was involved in one of the largest deals in the history of the casino industry recently, with MGM buying out Mandalay Resort Group in a $7.9-billion acquisition expected to close last month. As a developer, Kerkorian three times built the world’s largest hotel in Las Vegas. With the Mandalay acquisition, he’ll control 11 major resorts and the largest share of Strip hotel rooms, casino space and entertainment venues ever assembled by one owner, the Las Vegas Sun reported. Kerkorian has an estimated net worth of $5.8 billion, according to Forbes.

Residential/Commercial
Condo-hotels are the latest real estate concept in Las Vegas, allowing condominium owners to rent out their units by the night. Last month, the Palms resort announced plans to build a 599-unit hotel-condominium tower behind their property. The MGM Mirage, The Aladdin and the Hard Rock Hotel have similar projects underway or on the drawing board, the Las Vegas Sun reported.

Residential
With just under 50 percent appreciation, the Las Vegas market had the strongest price gains in the nation for the first nine months of last year. But such gains are highly unlikely this year, especially given the number of homes on the market, brokers said. The number of single-family homes listed on the area’s MLS in January was 13,800, compared to fewer than 4,000 homes on the market last spring during the run up in prices, according to the Greater Las Vegas Association of Realtors.

Los Angeles

Residential
Baby boomers made three-fourths of all home purchases in California last year and are credited for being the driving force behind the state’s rip-roaring housing market, according to the California Association of Realtors. Purchasers were typically repeat buyers, and those repeat buyers were on average married, 45 years old, and earning $100,000 annually. Meanwhile, the share of first-time buyers dropped to 26 percent in 2004-a record low, according to the survey.

Commercial
A controversial proposal to build a $200- million hotel in downtown Beverly Hills won approval in a ballot measure brought to voters last month. The eight-story Montage project has dominated civic discourse for more than a year and prompted a bigmoney campaign pitting the developers of the resort, the Athens Group, against the posh Peninsula Beverly Hills hotel, which invested heavily to defeat the project. The resort hotel will be built between Beverly and Canon drives, just north of Wilshire Boulevard, according to the Los Angeles Times.

Residential
While no one anticipates a return to the frenzied market of last spring, after a bloated summer and fall, low inventory could trigger a spring season of price increases after six months of relative flatness. In Huntington Beach, for example, there were 323 active listings at the end of February, compared with 481 in June and 117 in February 2004, the Times reported. Last spring, intense bidding wars drove up the median price in Los Angeles and Orange counties about 20 percent in less than six months.

Miami

Residential/Commercial
Roy Stillman, who recently developed the Metropolitan on East 90th Street in Manhattan, is partnering with Donald Trump on a 24-story, 298-unit condo hotel in Fort Lauderdale. The Trump International Hotel and Tower, which is being designed by Michael Graves & Associates, is scheduled to break ground this month, Globest.com reported.

Residential
The median price for a home in the Sunshine State has soared 17 percent in the last year to $182,400, from $155,800. Six of the nation’s fastest-appreciating metropolitan areas are in Florida, including number three West Palm Beach/Boca Raton, at 34 percent in the last year, and number four Bradenton, with a 32-percent jump, according to published reports.

Philadelphia

Commercial
A third major office tower is slated to break ground in Philadelphia after a nearly 15- year drought of new office construction. Developer Don Pulver plans to put up a building as high as 17 stories at 15th and Arch streets. Viacom is looking at taking space, the Philadelphia Business Journal reported. Other office projects underway include Brandywine Realty Trust’s 28-story, 728,000-square-foot Cira Centre, which broke ground last year and Liberty Property Trust’s 57-story, 1.2-million-squarefoot Comcast Center, which just got under way.

San Francisco

Residential/Commercial
Small apartments are creating controversy in San Francisco. Dubbed SROs, or single room occupancy units, studios with 350 square feet or less of living space have become popular with developers, the San Francisco Business Times reported. Nine complexes totaling nearly 500 units are either now under construction or seeking city approvals, but market-rate SROs are being opposed by some government officials and activists who say all SROs should be for low income residents.

Residential
The benchmark for what is considered a “luxury home” keeps rising in the San Francisco Bay area. Alain Pinel Realtors, which recently launched a market index, says the starting point is $1.5 million, according to the East Bay Business Times. Even that figure might be too low. First Republic Bank, which publishes the quarterly First Republic Prestige Home Index, said in February that the average luxury home in the Bay Area costs $2.55 million.

Seattle

Commercial
The Bill and Melinda Gates Foundation plans to build a new headquarters downtown. Last month, The Seattle City Council approved the $50.4-million sale of a 12.3- acre parking lot adjacent to the Seattle Center for the building. Construction will begin in 2007, according to Globest.com.

Washington, D.C.

Residential
A mansion believed to have set a Georgetown record for the highest-priced sale four years ago is back on the market. The 11,000-square-foot, four-story mansion is being listed for $8.5 million, $2.2 million more than what it sold for in 2001, according to the Washington Post. That translates into roughly $775 a square foot for the 29th Street NW home.

Commercial
The Baltimore office market is healthier than other U.S. markets struggling to recover from a downturn, and construction of office buildings is expected to heat up this year, with nearly three dozen projects likely to start rising by late summer, the Baltimore Sun reported. The Baltimore area ranked seventh nationally in the amount of office space built last year, completing a little more than 2 million square feet. Washington topped the list, building 6 million square feet of office space. Baltimore’s vacancy rate of 13 percent is better than the 13.7 percent national average.

Residential
While single-family homes remain the option of choice among buyers in the Washington, D.C., metropolitan area, more prospective buyers are looking at condos as a way to afford a home. While the D.C. area’s existing condo price of about $250,000 tops the nationwide median of $203,200, it still is significantly less than the market’s single-family home price, which was $371,000 for the last quarter of 2004, according to the Washington Times.

On a recent sunny weekend afternoon, a small group of bed-headed twenty-somethings waited for a table outside the Greenpoint Coffee House on Franklin Avenue. New arrivals in what used to be the most overlooked and run-down section of the neighborhood, they pointed out some of the new bars and galleries and said they were comforted by the area’s budding chic.

“The hardest thing about living in this neighborhood is getting to Manhattan for work,” said Eric Marshall, a 29-year-old graphic artist. “But our remoteness works both ways; it means that it’s also hard for people to get here, so maybe this area won’t go crazy with development like other parts of Brooklyn.”

But had this group heard about the proposed rezoning of the adjacent waterfront?

“I hear they’re still fighting that one out in court, so it probably won’t start for a few years,” said Marshall.

Marshall and his friends are part of a continuing influx of new, young residents who have brought this Polish enclave a smattering of bright ethnic restaurants, bars playing alternative rock, and sharply rising rental costs. Last month, the city planning commission approved a plan to rezone a huge swath of the Williamsburg- Greenpoint waterfront, ushering in a transformative new era of development that will affect the neighborhood’s last frontier. The plans have been sent to the City Council for review, the final step in the city’s formal, seven-month public review process known as the Uniform Land Use Review Procedure. The Council is expected to hold hearings this month.

Plans include a two-mile-long pedestrian esplanade to replace chain-link fences now blocking access to the waterfront. Studded along that landscaped ribbon, 20 condominiums of varying heights will be built. Plans also exist for several playgrounds, retail space at the base of those condos, and water taxi service linking Greenpoint with Midtown.

“The whole landscape of Greenpoint will change,” said Tom Le, a Fillmore broker. “This is a very exciting time, and the waterfront development will impact the whole market.”

No definitive plans exist, but brokers anticipate that over the next decade between 3,000 and 8,000 new units will be built along the waterfront in Greenpoint. All of this construction will occur in what is now the most desolate pocket of the neighborhood.

Brokers say that the waterfront construction will greatly accelerate developments already changing that no-man’s land. In the last two years, several new cafes, bars, galleries, and yoga studios opened along Franklin Avenue, the main artery of that sliver of Greenpoint. Despite the lack of convenient public transit to Manhattan, brokers say that many of their young walk-in clients are looking to rent space in that area.

“The same thing that happened along Bedford 10 years ago is happening along Franklin Avenue right now,” said Rosemarie Pawlikowski, a real estate agent for Albero Parkside Realty. “Young people and artists have begun turning those warehouses into loft spaces. That part of Greenpoint is becoming the new Williamsburg.”

It is unclear just how much waterfront development will change Greenpoint’s real estate market. According to Fillmore, the cost of one- and two-family houses has already risen by 25 percent to 38 percent, depending on whether the home is built with brick or wood.

Rental prices, however, have stabilized. Several years ago the average monthly cost of a one-bedroom apartment was about $1,400, but these days, brokers agree similar apartments are going for $1,200.

“Greenpoint is a very stable neighborhood and the biggest problem has always been the lack of transit directly to Manhattan,” said Le. “But what’s about to happen to this neighborhood is going to change the whole landscape.”

During a 1977 World Series game at Yankees Stadium, television commentator Howard Cosell directed the cameras away from the Yankees and Dodgers on the diamond toward a burning building a few blocks from home plate. “Ladies and gentlemen,” Cosell announced to the nation, “the Bronx is burning.”

It wasn’t much of an overstatement.

Much of the borough’s lower regions–that collection of neighborhoods roughly below the Cross Bronx Expressway known as the South Bronx – had been in disrepair and decline for decades.

By the late 1970s, landlords craving insurance money–and other arsonists– regularly torched South Bronx buildings, sparking fires that sometimes consumed entire blocks, scarring the region with emptiness and inviting comparisons to bombed-pocked German and Japanese cities at the end of World War II.

Barely a generation later, gentrification is replacing conflagration in the South Bronx. While it’s far from becoming the next East Village or Williamsburg–crime remains high and air quality low, for instance – the population of the once-emptying region is growing, and the real estate scene is evolving as more people discover a cheaper alternative to Manhattan and Brooklyn neighborhoods.

Randy Lee has watched the South Bronx real estate market since the 1960s. Lee, CEO of Leewood Real Estate Group, said middle- to high income homes are going up in the South Bronx, although only 10 years ago developers stuck mostly to building low-income housing. That fresh housing, Lee said, is being snatched up by people who would’ve left the South Bronx after a raise at work or starting a family, as well as by people who are returning to an area once synonymous with urban blight.

“What I see is that, where developments were a dime a dozen even five years ago,” Lee said, “the competition today from as far down to the 140s is hot.”

The South Bronx’s population increased 11.8 percent in the 1990s, according to the Institute for Civil Infrastructure Systems at New York University, which spearheaded a policy study of the region in 2004. That’s a greater population increase for the decade than the borough, the entire city and the state. With an approximate population of 523,000 as of 2000, the South Bronx is home to 40 percent of the borough’s population. The demographics there are shifting, with the percentage of African-Americans in the South Bronx dropping in the last several years and the Latino population increasing by double-digit percentages.

Artists and musicians are now part of the mix as they head north across the Harlem River in search of cheaper real estate. These reformed Manhattanites have rejiggered their new neighborhoods so much that the local media now speak of the South Bronx as a potential “next East Village.” That lower Manhattan neighborhood was once synonymous with drugs, crime and squatting, and is now the site of $2,000-a-month studios and $500,000 walk-up one-bedroom apartments.

Could the South Bronx ever commonly command such prices? Short answer: No. Long answer: Yes, but it’d take a while.

A brownstone dating from the late 1880s recently went on the market in Mott Haven for $470,000, a much lower price than a similar property would command anywhere in Manhattan. Many detached, framed houses sit snugly among the South Bronx’s public housing buildings and still-vacant lots, and, generally go for well under $1 million. Rentals mirror prices available in much of Queens, Brooklyn or Staten Island. A two-bedroom for under $2,000 a month is not uncommon in the South Bronx. Rezoning by the Bloomberg administration will soon make considerable amounts of industrial space available for commercial and residential use.

Lower rents are a draw for artists moving into the region, said Barry Kostrinsky, a co-founder of the Haven, an art space on 141st Street in Mott Haven. He has worked in the South Bronx since the early 1980s and lived there in the 1960s. Part of the region’s allure for artists in addition to being cheap is its accessibility to galleries in lower Manhattan, Kostrinsky said.

“The express subway stop on 138th means it takes 20 minutes to get to 14th Street, to the galleries there,” he said. “I’ve gone to 86th Street in 10 minutes.”

Also, because of its bad reputation for so many years, time forgot some areas of the South Bronx, Kostrinksy said. Development ebbed to a trickle, and industrial areas converted into art spaces now serve as islands of quiet in which artists can produce.

“So, the South Bronx,” Kostrinsky said, “it was terrible, right? That’s what people said. But it started to clean up 20 years ago.”

Still, crime rates remain higher in the South Bronx than in much of the rest of New York despite a more than 70-percent drop in major crimes over the past 12 years, according to the New York Police Department. The area’s crime-ridden reputation, established decades ago, lingers.

Crime, asthma, unemployment — not exactly strong selling points to lure new buyers and renters. Couple these with the resistance of some current residents who reject a gentrified South Bronx as another homogenous, expensive enclave, and real estate brokers have a clear challenge touting the region to outsiders, even with lower prices than much of the city. ”

It would be trite to say it’s an up-and-coming place,” Lee said, “but I think it’s certainly a comeback place.”

Perhaps if (or when) the Yankees host another World Series in the South Bronx, a successor to the late Howard Cosell will gaze over the borough’s southern environs and declare, “The Bronx is gentrifying.”

Buyers who wait for a New York neighborhood to change before purchasing might miss a chance to get in cheap or at all. The gentrification of the Upper West Side, Park Slope and Soho more than two decades ago might point to how the next hot neighborhoods may emerge.

In a new “Looking Back” feature, The Real Deal examines the modern-day origins of these neighborhoods all of which underwent gentrification in the late 1970s and early 1980s–with the help of interviews and archival sources.

Our first of three installments looks at the transformation of the Upper West Side from a decayed and dowdy survivor of the city’s late 1970s financial crisis into its current incarnation.

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Tourists and newcomers to New York might find it hard to believe that the word “sleazy” could be used to characterize the Upper West Side, but that’s just how the New York Times described Broadway between 59th and 96th streets in a 1982 article, which credited the area with a “sleazy vitality” that improved on its condition in the previous decade. At the time, in the midst of its early- 80′s redevelopment, the ambiance was becoming “genteel, even prissy” and “increasingly successful at attracting the class of young affluent professionals who have for so long felt at home on the Upper East Side,” the Times reported.

Today, Broadway and Amsterdam Avenue are lined with restaurants–some with white tablecloths and candles, some less classy–as well as boutiques and national chain stores such as Victoria’s Secret and Pottery Barn. Housing prices have increased by extraordinary lengths since the Gray Lady weighed in back then, and now the Upper West Side has relative pricing uniformity up as far as 110th Street.

For decades, property values on the West Side trailed far behind those of the East Side, but in 1979, the margin narrowed dramatically, almost overnight, wrote Barbara Corcoran, founder of The Corcoran Group, in her book “Use What You’ve Got, and Other Business Lessons I Learned from My Mom.”

The reason for the speedy gentrification, according to Corcoran: the “thirty-something” children of affluent parents on the East Side were moving in. She ignored naysayers who she said called her “crazy” and opened a huge West Side office to capitalize on the influx.

The Upper West Side’s rejuvenation happened despite abundant graffiti, abandoned buildings and the city’s fiscal crisis. At the same time neighborhoods such as the East Side, Greenwich Village, Chelsea, Yorkville and Park Slope were transformed by an urban-style social revolt.

Baby boomers rejected the lifestyles and values of their parents and “moved to rural Vermont or back to the city that Mom and Dad fled,” according to the Times. On the Upper West Side that often meant moving in to new construction or renovating old brownstones and hotels. At the time, the changes were expected to push poor residents from the neighborhood, and as observers correctly predicted put the squeeze to many middle-class residents as well.

Today, the Upper West Side is synonymous with a sort of settled, familial affluence. The asking price of a five-story townhouse recently listed by Corcoran is $8.25 million, an unimaginable price 20 years ago. Two-bedroom co-op apartments averaged more than $1 million last year, and two-bedroom condos around $1.7 million. Prices reach up to $23.5 million, the asking price for three adjoining apartments being sold in the legendary San Remo that could set a record for the most expensive apartment on Central Park West.

Next month: Manhattan refugees turn Park Slope from scruffy to spiffy in the 1980s, seeing the sparkle in tarnished, aging brownstones.

In mid-March the city announced an amazing statistic: the delinquency rate for property taxes plummeted to a five-year low of 3.62 percent.

The Department of Finance points to its $400 rebate carrot as a contributing factor. Indeed, because any delinquency of $25 or more on Oct. 15, 2004 would have nixed the booty, an astounding 40,156 homeowners ponied up to get the money back.

Additionally, the strong sales market caused homes to appreciate so that others could obtain homeowners loans at lower rates than Finance charges to ensure payment of taxes.

Finance also began taking credit card payments online which means these folks may find their home belonging to Master- Card or Visa somewhere down the pike. Don’t take that literally, but at the high interest rates those cards charge, allowing the tab to pile up for more than miles could cause later financial disaster.

But here’s where I have a problem. This apparent triumph obscures the fact that the city is purging its lists of properties owned by low-income residents, a good many of which may have been obtained through legal manipulations that took advantage of old tenant protection regulations.

Until reforms in the late 1990s, New York’s housing laws were vulnerable to significant abuse by tenants, often at the expense of middle-market property owners, rather than the abusive landlords who were the object of this legislation.

Way back in the 1970s, tenants did not pay their rents. In fact, for more than 50 years, city tenants were trained by ludicrous rent-control laws and ill-informed lawmakers to not pay rent.

It was a well thought out game halted finally by the Pataki administration, which administers the State Division of Housing and Community Renewal and oversaw rent-regulated units.

The game consisted of renting an apartment and promptly finding any reason not to pay, all fully backed by the city and state laws. Complaints to Department of Housing and Community Renewal were almost routinely handled in the tenants’ favor.

The fabled treble damages award was the ultimate payoff for a litigious tenant: after many years of court wrangling, a suit against a landlord could result in the tenant obtaining thousands and thousands of dollars in refunds of overpayments plus the additional treble damages from the apartment building owner.

When I call these laws unfair, to put it into perspective: I am not talking about infamous property owners who actually deserve the moniker “slumlord,” and do not supply heat or hot water or make any attempt to fix what’s broken. I’m talking about the typical businessman or woman who owned the properties as investments and knew they had to make repairs or not get the rents due.

Small buildings had it worst: if two units in a ten-unit building didn’t pay their rents, it could cause a catastrophic failure whereby the oil bill couldn’t get paid, the electric bill wouldn’t get paid, and eventually the property taxes.

Like chumps, the city took back these buildings which could not support themselves, and cost the city millions. Eventually, someone decided to “sell” these buildings to the poor tenants. They paid a nominal $250 to become the “owner” of their unit. Then they paid very minimal rents and were supposed to reenter the tax rolls.

A tiny little line in the law forbid the city to sell the “tax liens” to other parties, so the buildings stayed in the hands of tenants. That’s because bulk buyers of these liens actually end up foreclosing on and selling some of the properties.

Meanwhile, the city was spending more on these buildings than it would have received from the back taxes in the first place. According to an Arthur Anderson report cited by the City Council Finance Committee on the increase in tax lien sales, “Although each in rem property owner only owed an average of $36,000 in back taxes when the City took title, each in rem property was costing the City an average of $2.2 million to acquire, manage and prepare for sale.”

Back in 2001, I tried to look at this issue for the prior tax year. Eventually, the city’s Department of Housing Development and Preservation advised me they had removed over 1,700 properties from the lien sale. Many of these were Housing Development and Finance Corporation properties that were supposed to have returned to the tax rolls, and instead effectively continued to avoid paying taxes.

According to HPD, in 2004, 375 HDFC’s were excluded from the lien sale, owing $74,393,365. This year, 302 buildings were excluded, including 216 that were excluded the year before. Those 216 owed $57,816,131 in 2004 and increased to owing $63,317,500 this year. The total 302 HDFC exclusions currently owe $79,740,650.98.

“We tend to exclude the same HFDC’s every year,” said Carol Abrams, a spokesperson for HPD.

[In contrast, a spokesperson for the city's Finance Department did not think they could supply me with the information, and thought I would have to submit a Freedom of Information Act request.]

Remember, the city and state encouraged these people not to pay rent, which put the private owners into tax foreclosure. That meant properties were handed over to these very same tenants for bupkis, and the new “owners” have not renentered the tax rolls. In fact, the City Council and city agencies also continue to provide them help with normal, ongoing maintenance issues, such as the money to repair a roof, because these buildings are simply not functioning financially.

The in rem program removed properties from the City’s tax rolls for an average period of 19 years, as they vanished from the City’s list of tax delinquency properties, artificially inflating the tax collection rate.

So while the Finance Department touts the low numbers of properties on the lien sale, it’s worth remembering that numbers may not lie, but statistics can certainly fudge the truth.

However, it’s not all bad news. Some progress is being made in dealing with these properties, which will be examined in next month’s column

The hottest consumer financing concepts in the American economy — home equity loans and credit lines — have entered the gunsights of a key congressional committee.

The staff of the influential Joint Tax Committee, which advises both the House and Senate on tax policy issues, has proposed the elimination of interest deductions for all second mortgages and credit lines. The proposal is included in a wide-ranging “options” paper that identifies revenue-raising measures to stem the federal budget deficit, simplify the tax code and “improve tax compliance.”

The staff paper also proposes elimination of the current tax-free status of income received by homeowners when they rent out their properties for less than 15 days a year.

The curtailment of home equity deductions would raise an estimated $22.6 billion in federal tax collections between 2005-2009, according to the committee staff. The home rental proposal would raise far less – an estimated $100 million.

Both proposals are potentially highly controversial and may never make it into legislative form. The home equity plan in particular takes aim at products that are booming in popularity. Home equity lines and second mortgages accounted for nearly $400 billion in new loan business for banks during the fourth quarter of 2004 — up from $285 billion during the same period the year before, according to the Federal Deposit Insurance Corp. At thrift institutions, home equity lending increased by 62.5 percent in 2004 to $79.3 billion, according to the federal Office of Thrift Supervision.

Some banks have seen their home equity business more than double in the past 12 months. According to the lending industry trade newsletter, Home Equity Wire, Bank of America increased its home equity originations by 167 percent in the past year, racking up $16.2 billion in new loans during the final quarter of 2004. A key attraction of home equity lines and mortgages is the federal tax-deductibility feature of their interest payments, which reduces the effective cost of the loans to borrowers. Better yet, equity line dollars can be spent on any purpose, while all other forms of consumer debts receive no federal tax preferences.

That disparity between federal tax treatment of ordinary consumer debt and home equity debt is cited by the tax committee staff as one of the reasons to change the law.

“Effectively, present law gives unequal treatment to otherwise similar interest costs based on whether the debtor owns a home. This result is inequitable” to all other taxpayers who rent or have little or no equity in a home, according to the committee staff.

The inequity extends to entire regions of the country where home appreciation rates are lower than others and accumulation of home equity is slower.

“This tax benefit is more valuable to homeowners in areas with price-appreciated homes than to homeowners with flat or declining home prices.” Without identifying specific regions, the committee staff appeared to imply that the high-price, high-gain markets of the East and West coasts are unfairly favored by the tax code’s home equity deductibility provisions, at the expense of lower-inflation, more moderate-growth markets everywhere else.

Section 163 of the tax code allows homeowners to take interest deductions on up to $100,000 of home equity lines or second mortgages, in addition to interest writeoffs on up to $1 million in first-lien mortgage indebtedness. The committee staff derided the home equity tax preferences as superfluous icing on the already rich homeownership cake.

“It is unlikely,” said the staff paper, “that the deduction for interest on home equity debt significantly adds to present law incentives to encourage homeownership because most decisions to purchase a home are unlikely to be affected by the ability to deduct home equity” interest payments. “Individuals who benefit from (the current rules) have already achieved homeownership and are unlikely to stop being homeowners because the home equity debt rules are repealed.”

The staff paper criticized the tax-free treatment of home rental income under 15 days a year for essentially closing the government’s eyes to what is often substantial income. The rental loophole is used by homeowners in areas that receive periodic, large influxes of short-term visitors — the Masters golf tournament, for example, or the Super Bowl.

Owners of homes or condos can sometimes earn $10,000, $20,000 or more tax-free by renting out their properties to corporations or individuals attending an event.

Under the committee staff ‘s proposal, owners’ tax-free earnings would be capped at $2,000. Everything after that would be subject to ordinary income taxation.

The political outlook for both tax reform proposals? Stormy weather, at best. But their existence as recommendations ready to be crafted into legislative text by a professional tax staff should never be discounted at a time when the federal budget is spurting red ink at record levels.

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Ken Harney is a real estate columnist for The Washington Post.

A top Prudential Douglas Elliman agent, Iva Spitzer, has defected to rival Corcoran to work in new development.

Spitzer, who was the No. 3 producer at Elliman in 2003, has signed on as an executive vice president within the development sales and marketing division at Corcoran.

Spitzer has more than 20 years experience working with new developments and had been named the top producing broker on Manhattan’s Upper West Side during her tenure with Prudential Douglas Elliman several times.

Previous projects of Spitzer’s include 171 West 57th St., 426 West 58th St., 45 Walker St. and 190 Riverside Drive.

“New York City is poised for an avalanche of new development activity and we are leading the charge to help ensure that demand for new homes be met in a way that meets the discerning tastes of today’s home buyers,” said Pamela Liebman, Corcoran’s chief executive. “Iva’s expertise will aid in these efforts.”

Spitzer is also a photographer who has shot the people, culture and wildlife of Africa, and has had numerous shows of her work over the past decade.

In the wake of Andrew Heiberger’s March resignation as president of Citi Habitats, two of the firm’s top agents have decided to go into business for themselves.

Andrew Barrocas and Daniel Baum said they have formed The Real Estate Group, located at 112 East 23rd St., with the intention of putting “the home back into the home-finding business.”

The move was in reaction to “what seems to be a trend in New York City of large corporations buying up local real estate firms and absorbing them,” Baum said. Last June, Heiberger sold Citi Habitats to the Corcoran Group, which is owned by real estate behemoth NRT, a subsidiary of Cendant Corp., the nation’s largest residential brokerage. That didn’t sit well with some of Citi Habitats’ brokers.

“Many of these recently taken over firms have been forced to succumb to the day-to-day bureaucracy of their parent corporation, often at the expense of their agents, and in turn, the customers they are trying to serve,” Baum said.

Barrocas said the sale was the writing on the wall for him. “I was managing one of their offices for Citi Habitats, and when I heard of the takeover, I kind of saw it coming to an end,” he said.

But the final straw was Heiberger’s resignation as president to pursue development opportunities, though he will continue to serve as senior strategic advisor on Citi Habitats’ integration into Corcoran.

“I look up to him as a mentor,” Barrocas said. “The company was built around him. I don’t think it will be the same without him.”

At Citi Habitats, Barrocas said he was able to turn three offices around and make them all profitable within two years. Baum was recognized twice in four years as the top relocation broker and inducted into the Platinum Club three years in a row.

Now, they said they hope to recruit brokers who share their goals, though they’re not looking to create a huge firm, Baum said.

“We kind of look at it as we came from the army of agents, and we’re looking to start the Special Forces of agents.”

The discount-commission brokerage Foxtons has entered the New York City market with an office located in Queens.

The residential firm, widely disliked by its competitors for its 3-percent commissions, leased about 7,000 square feet of office space at 30-56 Whitestone Expressway. The office now has about 30 employees. Foxtons North America is a subsidiary of Foxtons UK, which is based in London and handles 30,000 clients annually.

Foxtons’ North America headquarters is located in West Long Branch, N.J. It already runs offices in New Jersey’s Bergen and Middlesex counties, and seeks to spread throughout the tristate area with plans for about 400 employees. Before opening the Queens office, the company had said it did a limited amount of business in the city.

Foxtons also is opening an office in Westchester, with about 30 employees.

“Foxtons is really saturating the market; in addition to our new offices in Queens and Westchester County, we are currently hiring about 25 people a week to keep up with the consumer demand for Foxtons services,” claims Gina Longo, vice president of marketing for Foxtons North America.

The dozens of film crews shooting building facades and Manhattan street scenes for movies and television shows don’t need brokers to make their exterior arrangements, but it’s a different story when the action moves indoors.

Prudential Douglas Elliman and Sotheby’s International Realty are two real estate companies that work with the city’s Office of Film, Theatre & Broadcasting, arranging interior locations with production companies for films and TV shows that use Manhattan as their setting.

Both count “Law & Order,” the ubiquitous crime drama that’s has been on the air for 15 years (casting legions of aspiring New York actors as extras), as a client.

Sotheby’s film location program launched seven months ago, and has a client list that counts mainstream studios such as Warner Brothers and small independent outfits such as Trigger Street productions, according to program director Laura Wagner. She got Sotheby’s into show business after leaving the William B. May Company, where she started a similar division.

A list of properties available for filming can be found on the Sotheby’s Web site, and Wagner said her properties in greatest demand include a gallery and theater space in the meatpacking district, a penthouse apartment on Fifth Avenue, a mansion on the Upper West Side and a landmark firehouse in Lower Manhattan.

Douglas Elliman officially began offering its film location services two years ago, and has found locations for “Sex and the City” and “Third Watch” as well as “Law & Order,” according to Adrienne Cleere, who heads the business unit. In the past year, Elliman has worked with production crews for the movie version of the hit play, “The Producers,” as well as the movie “The Interpreter,” both of which are currently being filmed in Manhattan.

Cleere’s busiest properties include highrise lofts (in scarce supply in Manhattan), townhouses, and apartments overlooking Central Park. Large one-bedroom apartments, with enough room for production crews, are also in high demand.

While most properties survive their invasions by lights and lenses, and are heavily insured throughout filming, Cleere says there’s no business like show business for unpredictability. She recalls how a door was accidentally blown off an Upper East Side townhouse that was the shooting site of a “Third Watch” episode guest starring Ann-Margaret as Judge Barbara Halstead.

While small mishaps have occurred during the filming process, Cleere assures her homeowners that their homes will remain unharmed while they are being used. Most owners’ only reminders of their properties star turns is during reruns.

Despite her founding role in what is now the biggest residential brokerage in Manhattan, Barbara Corcoran is putting her stock in the little guy.

The founder and chairman of The Corcoran Group, which says it has 2,000 agents in New York, the Hamptons and Palm Beach, told Business Week Online last month that the future of residential real estate belongs to small brokers who are able to be more responsive to changing markets.

“I think the future belongs to small brokers, and I’m one of the [few] people to say that,” Corcoran said. “The big guy clearly has the corner on the money, and that’s the downside to being little. But the little guy has the corner on creativity.”

Corcoran, who sold her company to conglomerate NRT in 2001 for $70 million but retains the post of chairman, also weighed in on the prospect of a housing bubble.

“Of course there’s no bubble,” she said. “I think the bubble theory is nothing more than an intellectual expression of people’s typical worry that good times can’t last forever. When your marriage is going well, you worry there’s a problem on the horizon. I think it’s more psychological than fact.”