Leasing activity in Manhattan in the first half of the year totaled 17.6 million square feet, the best six-month performance in 13 years and a 40% surge from the corresponding period of 2010, according to Cushman & Wakefield Inc. Meanwhile, activity in the last two months of the quarter was the strongest on record.

In yet another bullish sign, absorption—which measures the net change of occupied space in a given time—was a positive 3.2 million square feet. That marked the first time that measure has been positive for the first six months of the year since 2007.

“Leasing activity has been pretty impressive,” said Joseph Harbert, Cushman & Wakefield’s chief operating officer for he New York metro region.

All that activity helped shrink the overall average vacancy rate to 9.4% by the end of last month from 10.8% in the same period last year.

The surprising news for landlords—and the good news for tenants–was that despite the surge in deal volumes, the overall asking rents grew a mere 2% to an average of $55.52 a square foot.

“Increases are modest compared to the activity,” said Mr. Harbert. “This is still a relatively good [leasing] opportunity for tenants.”

Brokers at Cushman’s quarterly press briefing suggested several reasons for the disparity. One noted that the 9.4% vacancy rate still favors tenants and that once it hits 8%, which is widely considered a point where there is negotiating equilibrium between landlords and tenants, rents should shoot higher.

Another suggested some landlords were keeping quality space off the market, waiting for the market to further improve so they could fetch even richer numbers. Yet, a third suggested that the economy was still shaky enough where landlords didn’t want to quibble over price, especially not with credit-worthy tenants looking to lease significant blocks of space.

Some sub-markets in Manhattan are already seeing major increases. Mr. Harbert said rents in the Plaza District, the tony enclave favored by hedge funds and financial firms, were growing at twice the pace of the average, up 20% from the market trough.

Rents in the downtown market advanced more than in the other two business districts–midtown and midtown south. They jumped 4.2% to $39.38 a square foot. The market got a big boost from Condé Nast signing a 1 million square foot deal at 1 World Trade Center.

Source: Crain’s New York Business

New York construction unions have reached an agreement to cut the wages of members working on a massive residential project on the far West Side by 20%, sources said. The project, which will include more than 500 units of affordable housing, is being developed by the Gotham Organization Inc.

Meanwhile, Forest City Ratner Cos. has applied to the unions for similar wage cuts as it prepares to begin construction of its first residential tower at the long-planned Atlantic Yards project in Brooklyn. There, at least 50% of the approximately 400 residential units will be affordable.

The unions, in conjunction with contractors, began cutting wages and changing work rules for certain projects back in 2009 as part of an effort to lower construction costs and jumpstart projects brought to a standstill by the recession. It was just such an agreement that was a critical element to moving forward with Forest City’s Frank Gehry-designed residential tower downtown. At one point, the developer had proposed capping the 76-story tower at roughly half its height, but that never happened. It opened earlier this year.

Typically, the union offers concessions that lower labor costs by 10% to 15%. However, unions make steeper cuts for developers building affordable housing or residential projects in the outer boroughs because they tend to command lower sale prices and rents. Additionally, non-union labor has made greater inroads into those sectors than in major commercial projects in Manhattan.

Spokesmen for the Building & Construction Trades Council of Greater New York, a union trade group, and Forest City declined to comment. Gotham President David Picket couldn’t immediately be reached.

In the last several weeks, Gotham has reached a deal to secure a $530 million construction loan from a group led by Wells Fargo to build what is known as Gotham West. The four-building complex will consist of about 1,240 residential units and take up almost an entire city block bounded by West 44th and West 45th streets and Tenth and Eleventh avenues. Construction on the project, which will also include a parking garage and 17,000 square feet of retail, is expected to begin in the third quarter of this year, according to the company’s website.

The Gotham development will include a 31-story tower located on Eleventh Avenue with about 700 units. Adjacent to the tower, another mid-rise building will house 297 affordable-housing units available to low-, moderate- and middle-income families. Further east, toward Tenth Avenue, two 14-story buildings will be situated atop a platform over the Amtrak tracks and will include an additional 243 units of affordable housing.

The loan would be another sign of improvement for the beleaguered construction industry, which suffered horribly as development came to a virtual standstill during the recession. Lately there have been numerous signs of life in the industry. Just last month, Boston Properties announced it had secured law firm Morrison & Foerster as an anchor tenant for an office building on West 55th Street and would resume construction on the property, which was halted during the recession.

Source:  Crain’s New York Business

Beacon Capital Partners signs 99-year lease to erect a 350,000-square-foot building with office and retail space at 330 Hudson St. It’s the second big deal in two months for Beacon.

Link to building site here 

Trinity Real Estate signed a 99-year lease with an affiliate of Beacon Capital Partners to build an office building at the stalled development site at 330 Hudson St.

It is Beacon’s second investment in New York City in two months. In May, it signed a contact to buy between 70% and 80% of landmarked 195 Broadway from L&L Holding and its capital partner, GE Pension Trust, sources familiar with the transaction said.

Financial terms of Beacon’s deal with Trinity were not disclosed. The Boston-based real estate investment firm is planning an approximate 350,000-square-foot office building, including about 20,000 square feet of retail space at its base. Plans call for incorporating the site’s existing eight-story former warehouse into the new building, according to a Thursday statement by Trinity.

The proposed building is “as-of-right” and requires no zoning changes.

“We are delighted to welcome a company with the strength, experience and track record of Beacon Capital Partners to Hudson Square,” said Jason Pizer, president of Trinity Real Estate, in a statement. “They are committed to moving forward expeditiously on this key property, and we are confident the development will add immeasurably to the quality, vitality and excitement of this dynamic community.”

Several years ago Trinity leased the building to Tribeca Associates, which had planned to build a hotel on the site. However, Trinity took the site back last year after a nasty legal battle.

“With several new hotels in the area, the current proposed office/retail mix is clearly the most attractive and compelling development option,” Mr. Pizer said. He also pointed out that recent leasing activity throughout the portfolio offers another strong indication of Hudson Square’s promising future.

Meanwhile, Trinity had been negotiating for Pearson, the British media giant, to move into 330 Hudson St., sources said. It is unclear if those negotiations are still continuing.

Pearson would be a good fit for Trinity, which has turned its holdings in Hudson Square, just north of the Holland Tunnel entrance, into a mecca for media and creative firms. Pearson, whose holdings include Penguin Books and Financial Times, has offices in at least two buildings in New York: 1330 Sixth Ave. and 375 Hudson St.

Beacon, whose local holdings include 1211 Sixth Ave., was established in January 1998 and has sponsored seven investment vehicles with $11 billion in capital since its inception. Sources have said it is considering selling 1211 Sixth Ave.

Study ties 40,000-plus jobs here to creative services like fashion, architecture, and interior, industrial and graphic design. City could do more to stoke NY’s creative juices, study argues.

New York’s design sector is the unsung hero of the city’s economy, growing by 75% in the past decade to supply more than 40,000 jobs, an economic think tank reported Wednesday.

More designers are employed here than in any other U.S. city, thanks in part to an explosion in recent years of Brooklyn-based companies, said the report, released on Wednesday by The Center for an Urban Future, a think tank in Manhattan. It noted that the number of Brooklyn-based firms spiked from 257 in 2001 to 433 in 2009, for a 70% increase.

But the massive potential of New York’s design industries isn’t sufficiently exploited by local economic development interests, the report said, arguing that city and state governments don’t do enough to promote local designers and their work.

In other cities around the world, the government invests cash and energy in promoting their design industries, said David Giles, the study’s author. “Milan brands their furniture designers, London brands their industrial and graphic designers,” he explained. “And in the U.K., the Trade and Investment agency is a venue for foreign investors to meet manufacturers.”

Similarly, he said, other cities promote aggressive export strategies, while New York does not; for example, while New York’s state export assistance program has a budget of $1.5 million dollars a year, the province of Ontario has $70 million to work with annually. “There’s huge potential here,” Mr. Giles said.

Designers in New York echoed the study’s conclusions. Amy Smilovic, the head designer for the young contemporary design house Tibi, has noticed the differences in her travels. “When you go to Milan or Paris, or even Miami,” she said, “you get the sense that design is part of the heritage and that it’s very respected and promoted. New Yorkers are hard pressed to even know when fashion week is.”

Sometimes, it’s the little things that can convey that impression.

“In Paris, when you go to even the fabric shows, the trade center is so accessible by train and all the Metro platforms have signage up everywhere so everyone in Paris knows the shows are happening.” Ms. Smilovic said. “New Yorkers are hard-pressed to even know when fashion week is.”

But Brooklyn native Paul D’Aponte, whose company Fabbrica D’Aponte designs apparel, accessories and furniture, said that while the city doesn’t seem too concerned with marketing design, he can’t really blame public officials.

“When they’re having these massive problems with the education system, for example, that takes precedence,” Mr. D’Aponte said.

“I wouldn’t mind help with my business, but I’d be better off if I had had a better K-12 education to begin with,” he joked.

The city’s Economic Development Corp. said Wednesday it would review the report’s recommendations. “Over the past two years we’ve launched a number of programs dedicated to helping our thriving creative industries,” said a spokesman for the EDC. “But we’re of course always looking for new ideas.”

On Wednesday, the EDC announced the implementation of “Fashion Campus NYC,” an initiative designed to give exposure to up-and-comers in fashion and retail management. It is the first in a series of six initiatives the EDC has planned to promote the city’s fashion industry.

The study by Mr. Giles defined the city’s “creative economy” as a work force of around 40,500 in the fields of fashion design but also architecture, interior design and graphic and industrial design.

Hat tip:  Crain’s New York Business

“Big Tent” event brings together economists, designers in half-day session

Gary H. London

Architects and other designers need to readjust their careers to match the “new normal” in real estate development, according to local economist Gary London.

“The past is not prologue,” London says. “Virtually every understanding we’ve had about the built environment prior to the recession has changed.”

Those include smaller homes, less square footage per employee in offices, the Internets impact on stores and shopping and reduced manufacturing.

London said the upshot of these changes is that architects and others in related fields need to think of their career futures differently “because the environment will be different.”

“The job market will come back for them, but at the same, slow pace that the industry is expected to come back,” he said.

London will make these points at a half-day session sponsored by various architectural and design groups from 8 a.m to noon Saturday at the New School of Architecture and Design, 1249 F St. in downtown San Diego.

Organizers call it a “Big Tent” function, because it includes many design-related organizations and professionals all meeting in one place.

“The industry is 40 percent unemployed,” said architect Jack Carpenter, who is organizing the event. “The new economy is barely getting off the ground, and we know it is going to be different than it was.”

He said architects and others in the construction business will have to get used to working on smaller projects and, in housing, on apartments and town houses, rather than single-family homes.

“One thing we’re going to be talking about is expanding your portfolio,” Carpenter said. “You have to understand the new technology, construction management and other areas people might migrate into.”

Besides London, economist Alan Nevin also is scheduled to make a keynote speech. Panels will follow that include changes in governmental rules and regulation, new approaches to mixed-use development, legal changes affecting developers and financing issues.

Source:  San Diego Union-Tribune

In just five years, Matt Rinka has built his firm, Rinka Chung Architecture Inc., into one of the hottest architectural firms in the area.

The Milwaukee firm is working on two major downtown projects — the Moderne apartment high-rise in the former Park East freeway corridor and Washington Square, which could be the first new downtown Milwaukee office building in years if it moves according to plan.

The firm has grown from a half-dozen people in its first three years to 17 and growing this year, increasing revenue by 50 percent or more each year.