Office Market Rebound Years Away?

Dow Jones Newswires - RealEstateJournal Property Report - September 26, 2003

It could be another four, five -- even six years before the office real-estate market rebounds, according to Nicholas Chermayeff, managing principal at Barrow Street Capital LLC, a real-estate investment firm.

Speaking at an Information Management Network real-estate investing conference in New York recently, Mr. Chermayeff said rents and occupancies have been dropping like stones -- with New York City being among the hardest hit. The recent sale of the prestigious General Motors building in Manhattan to Macklowe Properties for about $1.4 billion, or $800 a square foot, was 'completely insane,' he said. 'I can't imagine anyone paying that price in New York' when vacancies are rising, the economy is getting worse, tax rates are going up, property taxes are on the rise, and the threat of terrorism lingers in the air, he said." "I think these trophy buildings that are trading at these lofty prices could correct 25% to 40% within five years," he said.

"We're not investing at all in New York," Mr. Chermayeff said. In fact, "we're not investing in office anywhere in the country right now because we're very bearish on the office fundamentals. We're selling all of our office buildings," he said. "In our view, it's a dangerous and treacherous time" to be buying.

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