Wall St. Woes Give Rise to Talk of 'Black September'
By Michael Stoler

As layoffs begin on Wall Street as well in the professional service industries, the real estate industry is bracing for a wave of office space to hit the market, followed by a precipitous fall in rental rates and a surge in vacancy. Even the most optimistic real estate executives are finally beginning to worry, with many dubbing this month "Black September."

"Due to the recent events, rents are down by at least 10% to 15% and trending downward," the president of Newmark Knight Frank, James Kuhn, said. "If a building in the Plaza District expected to rent for $150 per square foot, the price is down to perhaps $110. Certain markets are even worse, especially downtown."...
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...In another indication of the problems facing the project, Forest City recently sent a letter signed by the project’s celebrity architect, Frank Gehry, to chief executives of many of the city’s biggest corporations, inviting them to become a tenant in the “centerpiece of the project,” Miss Brooklyn. It was originally scheduled to be completed in July 2009.

Brokers said that developers usually home in on companies actively looking for new headquarters, rather than cast such a wide net. Forest City’s approach was more akin to cold-calling to solicit interest, a possible sign, they said, that the developer was struggling to find tenants.

Mr. Ratner insisted that the Brooklyn office market remained healthy, but he conceded that “until we get a tenant, we won’t start Miss Brooklyn.”...
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...The chief operating officer for the New York metro region of Cushman & Wakefield, Joseph Harbert, said: "During these days of historic events for the country, it will take some time to sort out the state of the commercial office marketplace. I suspect it will make corporate decision to lease space more cautious and deliberative."...

...A partner of mine at Apollo Real Estate Advisors, William McCahill, said, "Just like the Capital Markets, the New York City office market will probably go through a period of lack of confidence. Bankruptcies and forced mergers of some of the household names in the financial market will not only cause significant available space; but, the thought of expansion will simply not exist. Ken Lewis of Bank of America announced that the Merrill merger would produce significant cost savings for the combined company, which will definitely be a result of lower occupancy costs. Unfortunately for the office market, all major financial companies will be looking to cut costs. This ripples through the system in less revenue for lawyers, accountants and consultants. "Belt tighting" will be a way of life...

...This past Monday, at The Money Summit event I coordinated and moderated, a group of 10 prominent commercial banks and insurance company senior lenders concurred that financing, if available, has returned to its basic of low leverage, higher loan-to-value of 50% to 60%. Few lenders or investors have any desire to provide financing for commercial office building in New York City...