| NEW YORK
NEW YORK Nov 7 Lower Manhattan office building
values are likely to suffer as a result of damage inflicted by
Superstorm Sandy that has left thousands of downtown Manhattan
workers unable to return to their offices, major real estate
executives said at a conference on Wednesday.
"I think there's been value erosion downtown," Howard
Lutnick, chairman and CEO of Cantor Fitzgerald LP and BGC
Partners Inc, said during the New York University
Schack Institute of Real Estate Capital Markets in Real Estate
conference. "It had just started to come back. The concept now
of fear of flooding is going to affect values."
About 500 of his employees are unable to return to the three
floors they occupy at 199 Water Street. Lutnick expect that to
continue for six weeks to two months. Meanwhile his staff has
been doubling up at the company's midtown offices and trading
floors at 499 Park Avenue and its connected building at 110 East
Nearly one-third of the 101 million square feet of office
space in downtown Manhattan either was closed, powered by
generators or had no heat due to the flooding Sandy inflicted
last week, said Jones Lang LaSalle Inc. There was no
correlation between the age of the building and the damage
suffered, the real estate services company said.
Lutnick, unfortunately, knows about disasters. The company
occupied floors 101 through 105 of One World Trade when it was
destroyed on Sept. 11, 2001. Cantor Fitzgerald lost 658 of its
960 employees who worked there.
"All disaster recovery plans are a disaster," he told about
475 real estate investors, bankers and students at the
Cantor Fitzgerald's lease at 199 Water Street expires in
about 15 months, he said, and the company has yet to decide
whether to renew it. Lutnick said downtown landlords may have to
make more concessions and ultimately take in less rent to
convince tenants to stay.
"They'll have to offer more value to get them to stay," he
The destruction and prolonged building closings and heating
and electrical interruptions will take their toll on property
values, Darcy Stacom, CBRE Group Inc vice chairman, said
later at the conference.
"Will investors think about this when they look at buildings
in hard-hit areas? Yes," she said.
The repercussions from Sandy could reach well past downtown.
Part of Hudson Yards, the office and housing development planned
for midtown's far west side, is also in the flood zone. That
could prompt some changes to the plans.
"It is a subject that we and our partner will definitely be
talking about," said Andrew Trickett, senior vice president,
U.S. region, for Oxford Property Group, the real estate arm of
Canadian pension fund Ontario Municipal Employees Retirement
System. Oxford is Related Companies' equity partner in Hudson
Stephen Ross, Related's chairman, said if Hudson Yards had
been built already, it would not have had many problems.
"We have plans for backup generators for the entire
project," he said of the planned 6 million square feet of office
space, 5 million square feet of housing, and 1 million square
feet of retail space.
It will take public and private money to prevent another
disaster, real estate experts said, and will require regulatory
and zoning changes determining how things are built and where
they are located.
It will take even more money to prevent storm surges and
rebuild the city's old infrastructure.
"If they could do it in New Orleans, they certainly can do
it in New York," Ross said, referring to the infrastructure
built after Hurricane Katrina.
The rebuilding could stir demand for professions and trade
workers who were hit hard by the recession that dried up
financing for development projects.
"Construction workers who have been sitting on the bench for
five or six years, they'll be in demand," said William Rudin,
chief executive and vice chairman of Rudin Management Co Inc.
"They'll be able to get back to work, so will the architects,
the engineers, the contractors. You go down the line, one of our
strengths is that we have these industries here."