Manhattan retail rents plunging

Does that mean the maintainence fee in apt buldings that rely heavily on rental income will go up?

Well, in a long run, yes. In a short run, they will be dipping into the reserve funds if they are in the red.

Most buildings do not have have access to the revenue generated by retail (they don't own the commercial part of the bldg). Also, the co-ops which had commercial space were forced to defer income or keep rents low for a long time because no more than 20% of the bldg's revenue could be derived from rents.

Actually, they changed the law last year... much easier for folks to get retail.

That being said, if 20% of your revenue is cut by 1/3, thats still a significant increase in maintenance...

and so it goes....now if it extends to sellers facing reality we'll get back to more people able to purchase in manhattan.

But maybe not able to afford the common charges...

"taking a spot in popular Soho because the asking rent was down 65%to $70, versus around $200 a year ago."

They buried the lead.

Forgetting about Coops, the people who usually get killed when this happens are the guys who buy small investment properties at the top of the market. There are 2 reasons which go hand in hand: when the market is up, the multiplier guys use to price buildings goes way up (the age-old formula for buying these small buildings was "X times rent roll", with X = 6 or 7 in normal times to X = 12 or more in bubble times), and these buildings tend to be commercial rent heavy (like 60% or more of the building's income comes from one commercial tenant).

But going to a VERY small minority of small Coops who own their commercial space, thing of what can happen. Take for example: 476 Broadway, which has zero maintenance charges because of rent from the commercial space (I was actually looking for another listing which was emailed to me recently, but to show you how much times have changed, the search programs have all but dropped maintenance as a search criteria, whereas years ago it was very prominent). When they have their commercial space go vacant and go from some large number to ZERO in 60 seconds, think of what happens to the carrying of each unit?

look at Tishman paying five billion for stuytown...crazy!

30yrs, doesn't the building housing AquaGrill also get most of their maintenance from that lease?

Definitely a lot more buildings dt that get income from commercial portion. Uptown, not so much. There is only 1 building I know of on UWS s. of 96th that gets commercial income.

Maybe we can get some cool boutiques back. F*ck Pinkberry

"the people who usually get killed when this happens are the guys who buy small investment properties at the top of the market"

Or, well, ANYBODY buying ANY property with a mortgage at the top of the market, particularly when its a bubble....

"doesn't the building housing AquaGrill also get most of their maintenance from that lease?"

I think you are right, but that's not the listing I was thinking of (as far as I know, nothing on the market in that building). I wish they put the RPIE's online (Real Property Income and Expense Statements). I don't know what Aquagrill is paying, but it's got to be costing ?$75k? a year to run that building, so if they had to carry it w/o any commercial rent, each of the 5 owners (if I remember correctly, 4 of which paid close to bupkis (sp?)) $1,250 a month increase (from $0). That actually isn't that bad.

If I remember correctly (I say that a lot, don't I?) 35 mercer is collecting like $30,000 a month, which would mean vacant about $70,000 a year per owner lost.

JM, and Red Mango, and the banks, and ...

that's one of the reasons I love the east village (and similar), i can still find two old-time guitar stores, a ramen shop two doors down from relatively haute cuisine, etc.

we used to have this funky and wonderful little system of enterprise locations. it's true that stagnation is not progress, but i'm not sure i think that 10 h&ms (one or two would be nice) instead of a handbag district, a shoe area, manny's music.

lord, i'm sounding old. but opportunity does arise from ashes, and i have a failing antique/kitsch store upstate, so maybe, just might be a few years.

the only difference between Manhattan and the suburbs now is that in the suburbs the malls have roofs and no cars running down the middle of them.

Thats a pretty big difference.

I also find the traffic worse in the suburbs.

Maybe we can make the Ladies Mile into Freemont Street.

FWIW: I just left a central Village rental building where the landlord attempted to RAISE the already high-ish rent $100. I was moving into my new place anyway, but thought it sort of unbelievable they were attempting to increase the rent. And this LL is not known for flexibility. Meanwhile, the building is completely rented out and empty apts usually sit for no more than 2-3 weeks. For this top-end niche, at least in the Village, there has not been the sort of cataclysmic meltdown many on here do nothing but talk about as if all RE across the city has already fallen 50%. THe reality is that isn't true. Some niches are resisting this downturn better than others.

Thats why they call it a median. Some declined less or not at all.

Some have declined more....

"For this top-end niche, at least in the Village, there has not been the sort of cataclysmic meltdown many on here do nothing but talk about as if all RE across the city has already fallen 50%. THe reality is that isn't true. Some niches are resisting this downturn better than others."

Amen, kyle. Thank you for stating this. While I am bearish, so much stuff posted on SE sounds like apocalypse now. The word "bitter" is often used on this board. I think the more apocalyptic one sounds, the more bitter they are. And the bitterness makes them sounds like losers.

1

"For this top-end niche, at least in the Village, there has not been the sort of cataclysmic meltdown many on here do nothing but talk about as if all RE across the city has already fallen 50%. THe reality is that isn't true. Some niches are resisting this downturn better than others."

Wow, we have an anecdote. That proves it!

Ignore the, uh, stats. They don't mean anything.

I revise: there's so much contrary info, I'm not sure where it's going. Today, I'm bearish neutral negative, whatever that means.

Daniel -1

FWIW ... I'm in Commercial RE... it stinks here .....

"it stinks here ....."

maybe if you had a washer/dryer in your unit.... ;)

Everyone listen to 30yrs_RE - dude or dudette speaks the truth of NYC RE.... I was too young to really be in RE in the 80's, but 30yrs_RE seems to have experienced the right side of the L recovery that we are headed to in NYC.

I have NO fear that a seller's market will appear at any point in the next 2 years and some of the trades that will happen will make the last 20% decline look miniscule by comparison....

I think the "problem" with most broker's outlook as to what is going on is that they haven't seen a business cycle yet. usually, it's been 10 years, but we've been on the up part of the cycle so long that unless you've been around for 22 years you haven't even seen one whole one yet. When I was doing consulting at Salomon, at some point I was out for drinks with a manager of a trading dept. talking about "sales training" and he passed along something which may or may not be myth, but was interesting. he said "Do you know why all the retail brokers are so young? We don't hire anyone who has ever seen a down cycle. We don't want anyone who could even have in the back of their mind that there could be a down cycle. We want guys who honestly believe what they are selling can only go up."

Well, I think most of the brokers we hear from haven't been around long enough to have seen the last down cycle. Everyone is a prisoner, to some extent, of their own experiences. So in the same way as I am a prisoner of seeing the Hiroshima of NY RE, today's puppies "know" things only go up, and have seen that the last 2 or 3 times (like after 9/11 or after NASDAQ crapped out) that there is talk for a while of a market correction, but it doesn't last long and then prices go along their merry way on their never ending upward march.