Thursday, March 24, 2005

NY Commercial Property: Rents Down, Prices Up

The New York Post reports that the state Financial Control Board sees speculation in the property market. "Investors are so eager to get their hands on New York City commercial real estate that they're driving up prices beyond what the rent rolls would justify."

Those rents are down 20% in the last 4 years. "Average asking rents in office buildings were $47 a square foot last year, compared to $59 in 2001..there could well be some element of speculative buying"

2 Comments:

At 12:38 PM, Anonymous bunny said...

San Fran commercial bldgs are going for record prices (per sq ft). Yet vacancies are nearly 20% compared to under 2% five years ago. And rents are less than half what they were five years ago.

Why?

Simple. Hot money. Much of the buying is coming from national publicly-traded REITs. These have been stock market darlings since the tech crash because they throw off dividends. So they have been able to attract tons of $$$. And what do they do with the $$$? They buy stuff. As Hannibal Lecter says, "They covet. That is their nature."

The private players in SF (including the billionaire Shorensteins) are selling out. Smart private money out, dumb public money in. Happens every time.

So the public (via mutual funds) and pension funds end up with overpriced properties that won't pay off for 10-20 years---if ever.

 
At 12:45 PM, Anonymous Anonymous said...

bunny,
do you have the WSJ article? I saw it on Financial Sense but I don't have a subscription. if so please give us a copy..a

 

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