DRIVERS FOR COMMERCIAL PROPERTY DEVELOPMENT IN THE MANHATTAN

DRIVERS FOR COMMERCIAL PROPERTY DEVELOPMENT IN THE MANHATTAN

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Introduction

The Manhattan commercial property sector is one of the most successful sectors real in estate in the USA. The development of this sector has been driven by various factors that have an exponential development in the housing sector in the Manhattan. The end of a decade marked the beginning of a new market .the second half of the 2009 Manhattan market of houses reflected the start of a new era. This was marked by bankruptcy of the Lehman brothers in September 2008.sellers, buyers, and real estate professionals slowly adapted to changes including stringent if not irrational housing underwriting, increased unemployment and retrenchments, reduced compensation, a high price correction, tax credit for first time home buyers, rising foreclosures, decline of appraisal quality, expanded market times and a number of other challenges (Yudelson, 2009, p.45). The increased level of sales in the latter half of 2009 was encouraging; a recovery in housing department was later attained in 2012 by an increased employment rates and greater consumer access to credit.

Discussion

The number of sales jumped as inventory declined. The co-op sales in 2008 increased at an incredible rate of 28.3%. This level of sales is more than 3 times of the first quarter of 2009 which is considered then low point of market activity tipping in the fall of 2008. There is a consistency with the 10 year quarterly amount. The diminishing in the level of inventory in the market is attributed to the robust level of sales in the last quarter of 2009. The monthly absorption rate fell to 7.3 months due to the higher number of sales and lower inventory. The fourth quarter of 2009 represented 51.1% of all apartment sales which was an increase from 43.2 in the previous year (Miller, Spivey, & Florance, 2008, p.51). This represents a significant change for the same period a decade ago when the market shares of co-op sales were way below that. Of the total c-op stock, 97.3% were considered resale listings and 2.7% comprised of new development of condo-ops apartments with condo rules. These sales have led to a steady development of commercial property in the Manhattan region (Abbey & Richards, 2009, p.23).

The increase in the number of market days as listing discount jumped. The average days on market was 151 days a decrease from the previous 152 days in 2008. Listing discount continued to increase reaching a mark of 18.3% as compared to 4.5% in the previous year. The combination of increasing number of sales and decreasing inventory suggested that the amount of remaining listings required bigger discounts to be able to reach the current levels of the market as buyers continue to control the commercial property market. The average price per square foot was decreasing which led to higher bidding of land in the Manhattan which encouraged buyers to acquire more land hence more apartments were built leading to a higher development in the Manhattan (Booz, 2007, p.31).

The first half of 2009 was an encouraging period for Manhattan. The American recovery and investment act of 2009 proved to be an investment encouraging property owners. Housing and other real estate investments are provided with funds for energy efficiency upgrades. 6 billion dollars will be availed for energy efficiency and grants for conservation for housing and other commercial buildings. In addition to that, a further 5 billion dollars will be availed for low income housing assistance and another 2 billion dollars for the efficiency efforts with stately assisted housing projects (Giles, & Blakely, 2001, p.167).

The presence of resourceful mortgage investment companies has created number of opportunities to entrepreneurs and real estate property owners. These companies provide entrepreneurs with opportunities which serve as an alternative to avoid loan default. They have highly trained professionals who discover funds and resources which the entrepreneurs don’t know and make them accessible to them. There are funds available for people interested in joint ventures, developers and commercial real estate owners. These connections help in Pre Venting mortgage loan defaults, this has led to investors approaching the market without fear. This creates numerous opportunities for potential house owners hence leading to development of commercial property in the Manhattan (Yudelson, 2009, pp.67-9).

Another driver to the property development in the Manhattan is the government poilicies.The US administrators have came up with friendly policies that have created an ample atmosphere for investors in the Manhattan. The action of government in what it executes or it does not execute directly affects the property industry. Investors have ventured in investing their money in real estate. This has led to springing up of many houses in the Manhattan. The government has played a great role since it has gone to an extent of reduced taxes so as to encourage development in the area (Giles, & Blakely, 2001, p.45). The state government regime has seen more funds been directed into property sector.

For the last 4 years, the property market in the Manhattan has been flooded by with new home buyers who had been previously been renters and step up home buyers. Many people have found it easy to get funds in which many people could not have easily acquired. This has led to a lot of money being created for the potential home owners (Booz, 2007, p.31). Despite this action creating an instability in the market, it has enabled many people to own house and hence property development in the Manhattan.

In the last 4 years, the United States has seen a tremendous decrease in all its markets including the housing market. However, this declining trend has helped the Manhattan market alive through foreign investors. The continued depreciation of the dollar and the Manhattan real estate, foreigners found an encouraging investment in this market. Before this decline, foreigners were putting their workers in temporary houses while visiting on work in the US. Now, they are buying condos and have the landlord as the company. This company saves the company a lot of dollars (Choi, 2009, p.37). Temporary housing for foreigners used to be so expensive for the companies. When a firm owns a house in USA, it not only saves monthly money, but it also invests in the country. Manhattan property sector has grown so much due to this effect.

During the recent years the Manhattan real estate has been on a rise. This has made this property more desirable. However in international real estate, property, in the big apple is almost considered cheap. Recent survey shows that the Manhattan property market is ranked 15th most expensive in the world. As foreign currencies continue to rise, owning property in the Manhattan is always a sweet deal. When a European buys a house in the Manhattan, they instantly double the value of their money due to their favorable exchange rates. International companies find it a better option investing in Manhattan (Ang & Wilkinson, 2008, p.98). The New York real estate market has been kept alive by the increased interest in the Manhattan property. Even with the USA downward economic trend, the Manhattan property has continued to grow above the national trend.

Fierce competition in the Manhattan property market has lead to increased efficiency and improved service provision. This has made the property desirable hence attractive. International buyers face it off in the New York estate market to acquire property in the Manhattan. They bid for property and may end up with high prices for the property (Miller, Spivey, & Florance, 2008, p.97). This has made more apartments to be brought which has seen a steady growth of the Manhattan. The presence of New York luxury real estate market has been a great driver in the Manhattan commercial property development (Blackman, 2009, p.22). The New York real estate market has remained incomparable to none other market in the US. This market has remained a significant reason as to why the Manhattan prices are so high compared to others. This market plays to its own level of supply and demand rules.2012 was reported the most successful year for Manhattan real estate since 2008.broker confidence in this market has also increased in January 2013.this markets stability has continued to be a big boost for the Manhattan market.

In 2007, the prices of real estate in Manhattan Beach reached a peak at 2,190,000 dollars. The main reason for the peak was the stock in Manhattan Beach reached a low of 100 properties. Basically, when inventories in a region drop, the property prices in the area will increase in value. The historical bubble burst of increased prices coming with fewer inventories didn’t hold true in Manhattan since in 2011, Manhattan Beach median prices have dropped the same case with the inventory (Gaines, 2005, p.10). The low sales and low inventory has turned it to a buyers’ market. The number of migrants coming to the US has been increasing rapidly and it is estimated that the US will witness an increase in the number of immigrants in the tune of 12 million in 2012 up from 9 million in the recent past. The demand for housing in the Manhattan is increasing and it is very high that it makes up 30% of the market share (Choi, 2009, pp.40-1). For the first time, they have had to account for 55%-60% of first time buyers which has been a great driver in the commercial property development in the Manhattan.

Technology has also played a substantial role in the Manhattan commercial property development. Many people have been involved in internet and engaging in the free flow of information provided by improved technology. The market scenario for property has changed tremendously. Around 77% of homebuyers surf through the internet to choose a house of their choice (Cheikhrouhou, 2007, p.82). The realtors are also involved in the technology by providing necessary information through the internet to their buyers. There have been increased changes in advertising too. Consumers have ample information in their hands and now realtors have moved a notch higher in branding themselves more strongly since the consumer may switch to another option given the knowledge the consumer possesses. This has led to high qualities in the Manhattan real estate attributed to changes in technology.

The response to the hurricane sandy is another driver to the Manhattan commercial property development. Since hurricane sandy hit and damaged the much of lower Manhattan, questions arose whether Manhattan real market would equally be impacted. The bllomecommercial RE conference in November 13, a panel of real estate experts gave an optimistic response predicting that normalcy would resume in the year. This has given land owners and house owner’s confidence in the market which has led to its blossoming. New York has been the hub for most efficient business improvement districts in the country. A business improvement district is a public or a private partnership in which property and business owners choose to make a collective contribution to the maintenance, promotion and development of the commercial district (Abbey & Richards, 2009, pp.123-7). Business improvement districts have helped improve neighborhoods and quicken economic development throughout Manhattan region.

Business developments districts have helped in delivering essential services join the city of New York and Manhattan in particular. Such services that are provided include sanitation and maintenance. Sanitary services are provided as part of the business improvement district. It is the role of the BIDS to ensure that sanitation services are of the best quality and highly maintained to the appeal of home owners in the Manhattn (Blackman, 2009, p.42). This essential service has also to be maintained the BIDS to ensure that incase of breakages in the sanitation system the BIDS authority respond in urgency. Good management of this service has led to the Manhattan flourishing in terms of commercial property development.

The BIDS also provide public safety and a visitor service to the people staying in the Manhattan.safety is an essential factor to the development of any commercial property. BIDS ensure that security to the people and property is guaranteed and make sure that there is a serene environment in the Manhattan for residence and business purpose. Visitor services are provide for people new to the area or those seeking some services in the same area. Guarantee of security has made people confident with the Manhattan area and has contributed to the areas exponential development in commercial property (Cheikhrouhou, 2007, p.81).

BIDS play a substantial role in marketing and promotional programs. This has been one of the major drivers in seeing the development of commercial property in the Manhattan. There have been numerous advertisements which have been aired and which lead to ore consumer awareness. BIDS have come up with many promotional strategies which are all geared to market property in the Manhattan. It is always advisable to go for the promotional device which reaches a bigger audience (Yudelson, 2009, p.45). Marketing for the Manhattan properties has also been the burden of the BIDS authorities. This has led to many people having sufficient knowledge on what is available in the Manhattan which has led to development of commercial property in the area.

BIDS shoulder the responsibility of capital improvements. They bear the responsibility of making necessary improvements in the infrastructure of the area. It makes the service provision in the area reliable for comfort of the dwellers and occupants of the area. Well maintained capita encourages more settlement making development of the area fast. BIDS are also responsible for beautification of the area. This creates an appeal to the commercials and makes a person feeling good in staying in the area. Collection of garbage, planting of flowers, painting of lanes among other duties is some of the activities the BIDS are involved in. The maintenance of a beautiful environment has made the area desirable and attractive (Collier, Collier & Halperin, 2007, p.65).

All services provided by the BIDS are funded by a special assessment paid by the property owners within the district. 100million dollars are annually invested in the New York City’s 67 BIDS in programs and services for neighborhoods across the 5 boroughs. Establishing a BID, which is a community–driven initiative, requires the hard work of property owners, public officials, business owners and other stakeholders (Urban Land Institute, 2009, pp.17-9). Operating a BID is a task to make sure that the BID authority is effective. Improving the neighborhoods in the Manhattan requires coordination and o oversight by the BID staff and managers as well as communication with the SBS and other city agencies. The objective of the BID working together with the other city agencies ensures that the cities is developed and implement programs and services that improve their districts (Abbey & Richards, 2009, p.56). They ensure that they also share the best practices on BID management and operations. The city agencies provide an oversight of the BIDs financial procurement procedures with the philosophy of non-profit compliance and legislation to ensure that the Manhattan is user friendly.

Ordinarily, no one would have thought that groups of businesses would come together to clean up their neighborhoods would cause such commotion with the BIDS been accused of unnecessary taxes and polarizing the poor and rich. These accusations have not pulled back the Manhattan BIDS from their service delivery but it has propelled them to becoming more efficient overtime in service delivery. In cases where the city government fails, BIDS find success. There are no civil rules or red tape to govern the BIDs (Ang & Wilkinson, 2008, p.87). They can hire and fire employees based on performance which no civil authority or government authorizes. Starting 1960s, local government ignored key policies of sanitation and policing, in preference to creating large welfare state. At the same time, the growing number of municipal councils meant that it cost a lot more for provision of fewer services. Cities grew dirtier and unruly, customers fled to suburban shopping malls where they didn’t have to worry about being mugged (Banks, 2006, p.111).

BIDs have restored values regarding maintenance of public space. It has embarked to simple things such as keeping the Manhattan sidewalks clean and safe. It has embarked on a simple policy that a city that has failed to control minor offences such as garbage is only creating room for a further disorder. BIDs have been on attraction of opposition more so in New York. Critics argue that some of the Manhattan BIDS have embarked on secret designs to drive out the poor out of public spaces. One Manhattan BID namely the Grand Central Partnership has been at the centre of controversy due to its program to assist the homeless (Abbey & Richards, 2009, p.65). The terminal and its environs have for a long time provided the first glimpse of New York town thousands of visitors daily.

Conclusion

A few years ago, it saw the largest homeless in the camp with hustlers demanding payment for flagging down taxis, flocking upon tourists, spraying graffiti on stores, filthy sidewalks and broken works. The partnership put up cleaners to remove the graffiti within 24 hours of its appearance. The BIDs security patrol led to a 60% drop in crime. Taxi operators now operate orderly in queue outside the station and new street lights have been installed. All these services have been paid by the BID (World Bank, 2005, p.123). The BID resolved the homeless problem by the partnerships innovative service programs. The campaign against the partnership was printed in “New York times” alleging that the BID had deliberately hired goons to beat up the homeless and chase them out of the district (Giles, & Blakely, 2001, p.73). There was no reliable evidence that the BID had encouraged any violent actions towards the homeless. Nevertheless, the advocates won the public opinion tussle, and the partnership has been forced to revamp its outreach efforts. Generally, the presence of BIDs in the USA has been the major factor that has worked hand in hand to realize the development of commercial property in Manhattan (Booz, 2007, p.31).

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