While industry insiders don’t expect Brookfield Office Properties to encounter many problems finding retailers for the revamped World Financial Center, the same can’t be said for the complex’s 3 million square feet of vacant office space. Brokers told the New York Times that the soft leasing market, competition from the World Trade Center and the consolidation of the area’s financial firm industry will pose challenges to the landlord no matter how appealing architect Cesar Pelli’s upgrades to the complex prove to be.
“Brookfield is very strong on the leasing side,” said Michael Knott, a managing director at research company Green Street Advisors. “But the enormity of the challenge at this time seems to be pretty striking.”
The Class A vacancy rate in Lower Manhattan stands at 12 percent and will soon rise to 15 percent. While brokers and Brookfield have said they are encouraged that some 19 leases of more than 25,000 square feet have been signed by companies moving downtown from Midtown and Midtown South in the last 19 months, that well appears to have dried.
“I don’t hear anyone talking about defecting for Midtown,” said Jones Lang LaSalle New York President Peter Riguardi. “That situation is quiet now.”
The one clear advantage Brookfield has is that it expects the buildings to be debt free by 2014, meaning it can offer competitive rents of $50 per square-foot. [NYT]