- Last Updated: 1:02 AM, March 13, 2012
- Posted: 11:19 PM, March 12, 2012
There’s nothing wrong with the financial-services leasing market that a good presidential election won’t cure, says Larry Silverstein.
Acknowledging that Wall Street firms are “holding back and waiting to see what happens tomorrow,” the developer of 4 World Trade Center told us: “You can have a totally new picture at the beginning of 2013.
“Usually, when you have a new president or a president re-elected, a number of things happen. People look at the landscape with a sense of determination and purposefulness once uncertainty’s gone. Therefore, it’s much easier for major companies to make decisions.”
Silverstein believes it matters less to Wall Street who controls the White House for the next four years than merely to know who.
“There’s no question they’d rather see a Republican, but [if President Obama is re-elected], uncertainty would be gone from so many areas,” Silverstein said.
“Once the industry weighs in, it wouldn’t surprise me to see changes to Dodd Frank in legislation in 2013, to make aspects of the law much more rational and easier for financial firms to deal with.”
Silverstein said of how the new regulations have impacted Wall Street’s real estate decision-making, “Their willingness to make major commitments at this time is tepid. Their earnings are adversely affected.
“The cost of compliance is very severe.”
Wall Street’s retrenchment, largely due to the sweeping legislation and Europe’s debt crisis, likely cost Silverstein a potential tenant for his planned 3 World Trade Center, when Connecticut-based UBS changed its mind about anchoring the project.
It’s also made life tougher for Silverstein at 4 WTC, which has yet to ink a private-sector tenant, and for developers of other new towers with lots of space still available — the Port Authority and Douglas Durst’s 1 WTC, Stephen Pozycki’s 11 Times Square and Boston Properties’ 250 W. 55th St.
Not surprisingly, Silverstein — who famously leased his new 7 WTC at top rents despite claims it was a “white elephant” — is bullish on all the new WTC towers, thanks to their quality and downtown’s “whole new dimension” including transit and retail improvements.
Although the vacancy rate for Manhattan’s 392 million square feet remains a healthy 9.3 percent, according to Cushman & Wakefield, demand has soberingly tapered off — largely a reflection of Wall Street firms that are sitting on the sidelines.
The shortfall of leasing momentum is “shocking,” said Jones Lang LaSalle regional president Peter Riguardi, one of the city’s leading dealmakers.
“The fourth quarter of 2011 was slow and this year has started slow,” Riguardi said — noting that at least one expansion was his own company’s, as JLL is moving from 64,000 square feet at 601 Lexington Ave. to 85,000 feet at 330 Madison Ave.
How slow is “slow”? Cushman senior managing director of research Ken McCarthy said leasing for the first two months this year was 40 percent off last year’s figure for the same period, although “off only 20 percent relative to the past 10-year average.” A similar survey by CBRE found leasing in the same months off by 31 percent and “negative absorption.”
McCarthy said 2011’s stronger data reflected a rare “blowout” of giant deals, including Condé Nast’s 1 million square feet at 1 World Trade Center. But it’s cold comfort to landlords with large-block availability today.
McCarthy saw a silver lining. Although banks continue to shed jobs, he said the “regulatory environment requires people who know how to navigate it,” and so law, accounting and consulting firms are ramping up — to the tune of 32,000 new hires in the city last year.
However, some firms said to need hundreds of thousands of square feet may be in less of a hurry than landlords wished.
Law firm Chadbourne Park — being ousted from 30 Rockefeller Plaza — was reported in January to be “close” to a deal at 1 WTC. But there’s still no term sheet, sources said.
Meanwhile, law firm Morgan, Lewis, which had tested waters at other locations, has decided to stay at Peter Kalikow’s 101 Park Ave. where it just renewed on nearly 200,000 square feet.
So who’s looking with a sense of urgency? Microsoft. The software giant faces a lease expiration at 1290 Sixth Ave. in 2014, and has a short list of possible new homes for 200,000 square feet. And Boston and SJP, with 800,000 and 600,000 square feet yet to be filled, respectively, at their new towers are said to be wooing them hard.