Ugly truth revealed in Fitch’s renewal numbers
- Last Updated: 1:21 AM, July 10, 2012
- Posted: 1:00 AM, July 10, 2012
It’s one of those large deals that isn’t the kind the commercial market wants to hear about: Fitch Ratings has just inked a renewal/expansion deal for 180,500 square feet at 33 Whitehall St., sources said yesterday.
Sounds swell, right?
But it turns out that while Fitch is adding 41,000 square feet of elbow room at 33 Whitehall, it’s simultaneously leaving behind 100,000 square feet at 1 State Street Plaza.
This is what “consolidation” in financial services increasingly has come to mean — shrinkage. In this case, to the tune of 59,000 square feet.
Exactly none of the brokers said to be involved at either downtown address returned calls yesterday.
They include: Cushman & Wakefield’s John Cefaly and Gus Field, who represented Fitch in the re-up at Axel Stawski’s 33 Whitehall St; Stawski’s CBRE team of Edward Goldman and Jonathan Capeman; and CBRE’s Bruce Surry, the agent for 1 State Street.
News of Fitch’s space reduction came on the heels of second-quarter Manhattan leasing reports that did their best to depict things in their best possible light, but failed to ease concerns over financial services’ near-withdrawal from the market.
The second quarter turned in a “solid” performance, Colliers International said. Total leasing for the quarter was 7.4 million square feet over 5.1 million in the first quarter. Asking rents “increased” to $56.63 per square foot over $55.01 the previous quarter.
To which anyone with two cents’ of perspective might say: Whoop-de-do.
Colliers’ new Eastern Region president, Joseph Harbert, did frame the data this way: “While the remainder of 2012 will likely remain flat or slightly improved, I am optimistic that in 2013 we will start to see a return to the healthier, consistent market we have been waiting for.”
Count the qualifiers: will likely remain flat or uptick (meaning it could get worse), optimistic that 2013 will be better and we’ll start to see improvement.
Sure, today’s leasing scene is far from bad — 11 percent overall availability is far below that of other major US markets.
But it’s missing juice in the realm that matters most to the city’s future: tenants moving to new towers either recently opened or under construction.
Jones Lang LaSalle Regional President Peter Riguardi, one of the city’s most prolific dealmakers, struck an optimistic tone, saying, “We’re seeing a lot of activity and we expect the third and fourth quarters to be very robust.”
Yet he acknowledged, “We’re not going to have a boom until the financial sector engages the market.”
The fact that Wall Street is mostly sitting it out casts a damper on leasing efforts at the just-minted buildings. You know the biggest of them:
* One World Trade Center (the Port Authority and Durst Organization), where the needle’s been stuck at less than 50 percent committed since Condé Nast signed on 18 months ago (a perhaps imminent deal with the GSA would push it over the 50 percent threshold but we won’t bore you with that saga again).
* Four World Trade Center (Larry Silverstein), future home to the Port Authority but still hunting its first private-sector tenant.
* Eleven Times Square (SJP Properties), which has leased near-zero office space since Proskauer signed three years ago.
* The International Gem Tower (Extell), where 315,000 square feet is available for traditional office use on the West 46th Street side.
* 250 W. 55th St. Crain’s reported law firm Kaye Scholer has a nonbinding letter of intent to take 260,000 square feet. Another law firm, Morrison & Foerster, was the first signed tenant with 205,000 square feet.
A Kaye Scholer deal would leave Boston Properties’ 900,000 square-foot tower less than half leased a year after construction started and four years since the project was first unveiled.
The commercial market’s been propped up mainly by media companies, law firms and digital giants including Microsoft, which is expected to decide soon where to expand in Manhattan by 200,000 square feet — possibly at 250 W. 55th, the Wall Street Journal reported.
But despite some modest rehiring by financial services, it’s a far cry from the kind of staffing-up that leads to the need for bigger trading floors and related facilities.
In cutting back its own space, Fitch might be telling us more than we want to know.