Brookfield likes Manhattan as much as Toronto
Real Estate Weekly
Daniel Geiger
2/22/2008
But will Brookfield build on 9th without an anchor?
Yesterday The New York Times reported that Brookfield Properties plans to begin readying its development site on 9th Avenue between 31st and 33rd Streets for construction of up to 5.5 million square feet. The decision to begin the work, which entails building a platform over the LIRR rail yard tracks that run beneath the site, was first reported by rew-online.com on February 7 after the company’s chief executive, Richard Clark, mentioned that the construction would commence during a conference call that day.
The Times’ story provides a first look at renderings of the curvaceous pair of office towers that Brookfield wants to build on the parcel. The question is whether the firm will begin building the skyscrapers, once it has prepared the site, without an anchor tenant in place. The New York Observer, in a post yesterday, indicated that the answer to that would be no, a logical assumption considering the uncertain demand for office space now that the economy appears to be entering a pronounced slowdown.
On top of that, Brookfield is one of the bidders for the West Side rail yards a block west of its 9th Avenue site. Millions of square feet of office space and residential development are planned for the rail yards site, a major project that may discourage Brookfield from adding more supply in the area on speculative basis.
But during the conference call, Clark made an interesting comparison when assessing the risk of developing projects in the different office markers where Brookfield has a presence. Houston, which Clark described as a strong market because of the concentration of energy sector tenants there, was a city where Brookfield wouldn’t develop on spec because he said that other developers are planning projects that could quickly create a glut of supply.
“It makes us nervous,†Clark said. “It’s more risk than Toronto or New York.â€
In Toronto, Brookfield is in the process of building a new office complex, the Bay Adelaide Center, whose later phases may be built on spec. If Brookfield likes Manhattan as much as Toronto as Clark seemed to suggest, could that mean the REIT may in fact go ahead with the 9th Avenue project, especially if it doesn’t win the right to develop the rail yards?