Salomon Identifies Opportunities For Investors in N.Y. Real Estate
Values in the nation's biggest office market will continue to decline in the short term, but investment opportunities still exist, according to a report by Salomon Brothers Brothers Inc.
"We favor reinvestment in the highly cyclical New York real estate market and believe the fundamentals underpinning New York's transformation will keep an inherent premium intact," analyst Therese E. Byrne and managing director David Shulman wrote recently.
The office market's future could have critical meaning for big banks with hundreds of millions of dollars in loans on large new office buildings in the city. Their recovery on the loans will depend to a large extent on investors' finicky appetite for property in the city.
Salomon advised investors to focus on buildings in submarkets positioned to attract companies closing satellite offices. "We expect the Grand Central and Plaza districts and Rockefeller Center in midtown and the |new' Financial District downtown to best retain their values in the 1990s."
Illustrating the heterogeneity of the local market, vacancy statistics from CB Commercial, the national brokerage, indicate a rate better than the national average in midtown and somewhat worse than average downtown.
The Salomon analysts also warned clients to be on the lookout for a "false bottom" in the market, likely to occur in the next 12 to 18 months.
Salomon said Manhattan is in the second year of a 12-year building cycle and that means "investment horizons will be extended into the next century."
PHOTO : SPOTLIGHT ON MANHATTAN: Office vacancy rates