We did a spur-of-the-moment visit to the Big Apple last week to catch some shows and do some shopping. Instead, we got one helluva surprise. As soon as we turned on to tony Park Avenue, the home of America’s most expensive real estate, we saw a commercial real estate broker in a Brioni suit who was walking in circles holding a placard: “150,000 SQ. FT, ONLY $65 A FOOT!”
I thought it was a prank until we crossed the street. In front of the next building, two equally fine-dressed brokers held signs too, this time with a balloon, offering: “200,000 SQ. FT., $58 A FOOT.”
Next door, another brokerage firm had hired Bette Midler to belt some tunes to draw a crowd, while the owners passed out brochures for their prime building, where prices started at only $55 a foot.
For the next four blocks, it was more of the same. Obviously, the market had tanked. Since I knew the business in Washington and still had a few contacts in New York, I called a senior VP of leasing at an unnamed New York megafirm. I asked him if we could stop in for a cup of coffee.
Sure, he said, but everything had to be off the record.
He welcomed us with the coffee and a beaten-down look. Everything Bob wore was bespoke but obviously purchased before the crash. A button missing from a sleeve. A pant cuff frayed from wear.
“Bob, what in the hell happened here? Uncle Sam protected the market in Washington, but Park Avenue looks like a warzone.”
“Regardie, you don’t know the half of it. In fact, that’s exactly the right term. Park Avenue rents, for example, fell 50%, from $118 a foot in the first quarter of 2008 to $59 in the fourth quarter of last year.
“When Lehman Brothers, AIG, the hedge funds, the private equity boys, etc., collapsed, it was our version of the dot com bust. Rent stopped on millions of feet of space. Real estate magnates went bankrupt almost overnight. One guy lost seven trophy buildings in a couple of months; a billion-dollar family empire went kaput. From my window, you can see his new hot dog stand.
“Another tried to commit suicide by jumping out of his 57th-floor office, but the windows didn’t open. In a daze, he went down to the mezzanine-level outdoor restaurant to jump. But it was only one story to the street. All he suffered was a sprained ankle and a $100 ticket for disturbing the peace.”
“Those few firms caused all that carnage,” I said incredulously.
“You forgot about the banks and brokerage houses? Together they slashed a couple hundred thousand jobs and left empty buildings up and down the avenue. Further, every financial job lost had a multiplier effect — restaurants, retail stores, even massage parlors, were forced to close.”
“Is the market showing any life now?” I asked.
“Well, we are writing a few leases at close to $100 a foot, but volume is slow. Further, businesses that are renewing are not expanding, which shows their uncertainty about the future. In fact, one lease I wrote last week included a ‘Get Out Of Jail Card’ clause.
“What’s that?” I asked.
“It says that in the first 18 months he can cancel his lease for any reason and get all his money back, period.”
“And your owner took the deal,” I asked incredulously.
“What choice did he have. It’s Park Avenue real estate, 2011.”
Bill Regardie is the founder of Regardie Magazine.