More on Antares. Jimmy Cabera is still sounding confident – I admire that in a man.
UPDATE: you can get around the Craine’s “subscriber only” wall by coming in through Google News (works for most of these subscription only sites) but here’s some of it:
As everybody knows, in real estate, location is key.
No wonder executives at Antares paid a whopping $880 a square foot in March 2007 for a building in an area thick with hedge funds paying rents in the triple digits per square foot. The developers planned to upgrade the building and cash in on what looked like a sure thing.
Unfortunately, by the time the building’s $60 million metamorphosis was complete in late 2008, the market had crashed. Investment firms were in wild retreat, leaving 28% of Antares’ refurbished property vacant in an area that’s suddenly awash in high-end space.
Such sad tales have become commonplace in Manhattan’s Plaza district and on Park Avenue. But Antares was betting on a different market entirely: Greenwich, Conn., one of only three places in the nation where office rents broke through the $100-per-square-foot level, according to Cushman & Wakefield Inc.
Passing that threshold not only put Greenwich rents on a par with those for the toniest corners of Manhattan and Boston; it also priced most companies—except highly successful hedge funds and investment managers—out of the market.
The consequences of homogeneity are apparent today in the 4.5 million-square-foot Greenwich market, where the availability rate hit 19% in the -second quarter. That’s nearly double year-earlier levels, according to real estate services firm CB Richard Ellis Inc. Meanwhile, leasing activity in the period plunged 42% from 2008 levels, while average rents sank by 12%, to $64.20 per square foot.
Conditions are even grimmer in the central part of Greenwich, in the area around the Metro-North station—the precinct preferred by the most elite firms. There, rents declined 18%, to $90.61, CB Richard Ellis says.
“It was boom time here, but that changed after Bear Stearns and Lehman and the like [disappeared],” says Edward Tonnessen, an executive managing director in Stamford for Jones Lang LaSalle, a real estate services firm. “Demand didn’t go to zero, but it came close.”
The big factor behind the sea change: Greenwich’s outsize dependence on financial firms. They account for an estimated 80% of the total leased space there—as opposed to roughly a third of the space in Manhattan, where the availability rate hit 14% in June and leasing activity fell by 35%.
End of an era?
Stats for offices in Greenwich’s central business district (each qtrs. availability rate and rent per sq. ft.)
1Q 15.6% $90.58
2Q 9.2% $111.22
3Q 6.1% $108.42
4Q 6.5% $124.50
1Q 4.8% $108.11
2Q 7.4% $110.03
3Q 7.8% $118.87
4Q 10.4% $103.59
1Q 11.6% $99.16
2Q 21.0% $90.61
Source: CB Richard Ellis
“I don’t think we are going to see the $100-a-square-foot rents again in the near term,” says Robert Caruso, senior managing director of Westchester and Fairfield counties for CB Richard Ellis.
“I think we’ll see a rediversification of tenants,” says Mr. Tonnessen. “There are law firms and other professional consulting companies that were on the verge of getting priced out that will be able to stay.”
That change will not happen overnight, however. In fact, tenants may still be assailed by sticker shock, since some owners continue to ask for precrash rents. Antares, for example, is still asking $125 per square foot for its building at 100 W. Putnam Ave.
Jim Cabrera, a managing member of Antares, points out that the asking rent is nearly 20% lower than it was a year or so ago. He adds that Antares will break up the 43,000 square feet of available space to accommodate smaller tenants. The space had been leased to a hedge fund, which returned it.
“This building was developed for the upper-end tenant,” says Mr. Cabrera, touting the beautiful renovation, the gym, and the water views. “This is what they want.”
That may be true, but the question is, are there enough tenants that can still afford it?