Maybe some new neighbors?



UBS Said to Search New York Market for Space as Prices Fall

Dec. 29 (Bloomberg) -- UBS AG, Switzerland?s biggest bank, is searching for as much as 800,000 square feet of New York-area office space, making it the biggest tenant shopping the market as rents fall, two people familiar with the plans said. The bank has about 5 million square feet in New York City, suburban New Jersey and Connecticut and is considering offices either in Manhattan or outlying areas as its existing leases expire, New York-based spokesman Kris Kagel said in an e-mail response to questions.

?We have a number of leases that come up in 2013, so we have started to look at various options including new buildings, existing building, etc.,? Kagel said. ?A decision probably won?t be reached for several months.?

UBS already requested proposals from landlords, according to two people who spoke on condition of anonymity because the talks are private. The search could spark competition between commercial property owners in New York, where vacant office space has risen 57 percent since Lehman Brothers Holdings Inc. filed for bankruptcy in September of 2008, the beginning of a wave of labor cuts.

A building at 11 Times Square, a new 40-story skyscraper with 1.1 million square feet of offices, is completely unrented. Boston Properties Inc. postponed plans for another 1 million- square-foot tower in February after a law firm that had planned to take space there canceled.

Rents for so-called Class A offices in Midtown fell 25 percent to an average of $66.75 a square foot in the 12 months ending in November, according to New York-based property brokerage Colliers ABR Inc.

New Skyscraper?

UBS?s options include becoming the anchor tenant of a new Manhattan skyscraper, or building or leasing existing space, said the people familiar with the bank?s search.

The company has been in contact with ?various? landlords in New York City and the New Jersey and Connecticut suburbs, Kagel said.

?It would definitely be a boon to the landlord that lands them,? Robert Sammons, research director at Colliers, said in an e-mail. ?Manhattan rents are at or near their low point. It remains an ideal market for the tenant.?

UBS?s biggest Manhattan offices are at 299 Park Ave. and 1285 Avenue of the Americas, both in midtown Manhattan. The bank also has wealth management offices at Lincoln Harbor in Weehawken, New Jersey. Kagel declined to say which leases are expiring first.

UBS also occupies a trading complex in Stamford, Connecticut, which the bank says is the world?s largest trading floor at 103,000 square feet. The Stamford and Manhattan offices together house UBS?s U.S. investment-banking headquarters, Kagel said.

Hints the Worst May Be Over for Office Space in New Jersey

New York Times
By ANTOINETTE MARTIN
Published: December 29, 2009

The market for office space in New Jersey took a beating in 2009. The vacancy rate swelled to about 22 percent. Rents sank by at least $1 a square foot. And despite its traditional strength as a white-collar job base, the state lost office jobs at a faster clip than the nation at large.

The question now seems to be whether some faint signs of life will continue in the new year.

Some office market specialists said that rental rates had fallen so much and vacancy rates had risen so much that more deals were being struck. Craig Eisenhardt, a leasing specialist with CB Richard Ellis, called the situation a ?flicker of an uptick.? Based on lease deals from Oct. 1 through the first half of December, he said, ?it looks like we are ending the year with a 21.5 percent vacancy rate. That?s down from 22 percent in the third quarter.?

Daniel Loughlin, the managing director for another large commercial real estate company, Jones Lang LaSalle, agreed. His company predicts an additional 150,000 square feet will be occupied in the final quarter compared with the previous quarter.

Given the size of the total market, Mr. Loughlin said, such a gain is minimal. And agreements are increasing primarily because of renewals at renegotiated prices, he added. ?But it is still the first time the vacancy rate has declined in seven quarters,? he said.

Gualberto Medina, a former state secretary of commerce who heads the New Jersey office of the commercial real estate company Cushman & Wakefield, cited a survey performed last fall indicating that half of the top 500 companies in New Jersey had laid off employees because of the recession.

The same survey, produced by researchers at Rutgers University who interviewed senior executives during the final three months of the year, showed that 76 percent of companies expected to reduce, or continue reducing, costs in 2010, and 31 percent anticipated more layoffs.

Mr. Medina said, however, that the numbers might be misleading.

?We have to bear in mind that these executives were talking about their intentions while still in a period of severe economic uncertainty,? he said. ?Those were foxhole predictions. Personally, I see some positive indicators at this point ? and a trend line that is good.?

Several of the larger office landlords in northern New Jersey reported clear signs of improvement.

SK Properties, based in Bridgewater, completed more leases, in terms of dollars and volume, this year than it did in 2007 and 2008 combined, according to its chief executive, Justin J. Gingeleskie.

?One main factor was the offer we made to all tenants in our portfolio? of 1.3 million square feet of office properties, Mr. Gingeleskie said. ?We will hold your rent where it is now, with one month free, for a three-year extension; many took advantage of that.?

But Mr. Gingeleskie also pointed to a ?star performer? in a growing field, the AMCS Corporation, which does engineering for processing and power plants. It tripled its space and moved to a larger building in Bedminster, from Bridgewater.

Parsippany, in Morris County, was once a stronghold for Fortune 500 companies. The vacancy rate there rose to 25 percent this year. But a new 100,000-square-foot structure, built speculatively, was fully leased to the law firm Day Pitney, in a deal announced in late October.

?We feel that legal services is one of few areas where some expansion is occurring,? said R?my deVarenne, senior vice president of CB Richard Ellis?s office in the state.

Mr. deVarenne and other market specialists also pointed to ?small pharma? and medical research centers as industries that will take up some of the slack left by the big pharmaceutical companies that have reduced their presence in New Jersey.

The mergers of pharmaceutical giants ? Pfizer with Wyeth, and Merck with Schering-Plough ? have created extensive office vacancies this year, with more disruption to come, said Jerry L. Barta of Alfred Sanzari Enterprises, a large office landlord in Bergen County.

But Mr. Barta said PharmaNet?s renewal of a 122,000-square-foot lease in the Princeton area was something of a positive sign for northern New Jersey, and he mentioned Otsuka America Pharmaceutical?s new lease in West Windsor of 67,531 square feet.

?New Jersey has lost jobs in the pharma and biotech industries in the last 18 months while other states have expanded,? Mr. Barta said. ?The picture is definitely not pretty. But at least people now seem to be over the panic stage, and realize the world is not coming to an end, and they can actually get back to running their businesses and think in longer terms.?

The market for office space on the Hudson River waterfront is beginning a recovery, analysts say. Steven J. Pozycki, the chief executive of SJP Properties, was somewhat less sanguine. His company has an office tower under construction near Times Square in Manhattan, and it developed the Waterfront Corporate Center in Hoboken.

?Manhattan is definitely on the comeback,? Mr. Pozycki said. ?In New Jersey, where the office market has been lackluster for the past two years, we are seeing a slight pickup in the last quarter. The good news is we?re not out of gas; the bad news is that it?s only less bad than it was.?

Average asking rents this year sank below $25 a square foot for the first time since 2006, according to CB Richard Ellis. But in select submarkets, like the waterfront, Princeton and Newark, asking rents remain higher, around $30 a square foot.

However, Mr. deVarenne of CB Richard Ellis added that in 44 percent of the deals made this year, companies did not even post asking rent, but rather ?worked with any potential tenants who came through the door,? and offered bargain renewals, too.

Mr. Medina of Cushman & Wakefield said the state?s success in luring the Depository Trust & Clearing Corporation was a ?potential omen of more good things to come.?

The company is expected to move 1,600 jobs from Wall Street to the Newport Office Center in Jersey City as of 2013, using tax-break incentives.

Mr. Pozycki, however, said the deal was atypical, since it was negotiated privately with the involvement of state officials.

?It?s a glass-half-full type of situation,? Mr. Medina said. ?As we continue to bump along the bottom and read tea leaves, many things become a matter of opinion, or attitude.?