New Jersey Real Estate Lawyer Blog

Although commercial lease deals in New York and across the US are on the rise, many tenants are actually doing more with less space. In the second quarter, three out of the five biggest leasing transactions in New York City involved contracts for the same square footage or less. This is a growing trend throughout the US, as companies struggle to turn a profit and make due with fewer employees. An efficient use of office space, including open floor plans and less space per employee, is part of the overall strategy that companies are embracing to cope with the economic climate.

In the first and second quarters of 2010, leases nationwide were signed for 161.3 million square feet of commercial real estate space. This is nearly a 6% increase over the 12 months ending in March 2010. But, with companies unable to return to the staffing levels of a few years ago, the need to lease the same amount of office space has dissipated. The net result is a reallocation of the same or even less space to an almost equal number of tenants across the US.

Accounting firm Deloitte is reported to be requesting tax breaks of $11 million from New York City to help fund consolidation of its offices at 4 World Financial Center in Manhattan. The deal proposes a reduction of the company's office space from 934,000 square feet to 390,000 square feet. Deloitte intends to spend approximately $90 million to redesign the space and has left the door open for an option to expand the lease to 630,000 square feet. This type of consolidation is becoming the norm in all sectors of the US economy, from government to energy and financial services.

Continue reading "Increase in New York Commercial Leasing May Only Signal a More Efficient Use of Office Space " »

Iryna Lomaga Carey and Allison Lissner provide an excellent checklist for tenants in their New Jersey Law Journal article "Subordination, Nondisturbance and Attornment Agreements: A Minimum Standard Tenant Checklist." Subordination, Nondisturbance and Attornment Agreements ("SNDA") should be the rule and not the exception for commercial tenants expending significant amounts of money and time on their leasehold improvements.

SNDAs are negotiated between lenders and ground lessors of commercial property to prevent their lease from terminating after a default by the landlord on its mortgage. Without a SNDA, after a default lenders can elect which tenants it wants to keep or replace without giving any consideration to the leases previously executed by the defaulting landlord and tenant.

Continue reading "Subordination, Nondisturbance and Attornment Agreements: An Absolute for New York and New Jersey Commercial Tenants" »

"Let's make a Deal" is the name of the game for Manhattan tenants looking to renew leases, renegotiate leases or lease for the first time commercial space in the city, according to Bradley A. Kaufman's New York Law Journal article, "Projecting Leasing Trends for 2010." This is an opportune time for tenants to take advantage of a de-stabilized market by asking for more favorable terms. Real estate experts believe that leasing for 2009 is a very good indicator of the 2010 leasing landscape. In 2009, with unemployment and vacancy rates escalating in New York City, rental rates decreased and landlord concession packages increased.

Average asking rents in 2009 plummeted from $81.71 per rentable square foot to $56.89 per rentable square foot in Midtown (registering a 30% decline). In some cases, higher end buildings saw a decline of up to 50%. Retailers such as banks and large national retail chains ended their leasing dominance due to increased vacancies and decreased leasing velocity.

Subleasing became an important tool to shedding vacant space. Landlords and sub-landlords offered incentive packages to attract or retain tenants. Consequently, net effective rents on completed transactions fell as much as 45%. One of the growth markets in New York City is the office suites market with companies such as "NYC Office Suites" entering into long subleases for larger blocks of space. Companies like these take these blocks and break them up into smaller individual offices and meeting spaces to lease more flexibly to smaller users.

Continue reading "Manhattan Commercial Leasing: 2009 Indicates 2010 Outlook" »

A.D. Pruitt and Lingling Wei write in their Wall Street Journal article "Dreams of Retail 'Xanadu' Meet Harsh Reality" that New Jersey Governor Christopher Christie is trying to figure out how to handle the unfinished retail center dubbed Xanadu Meadowlands ("Xanadu") by its developer, Colony Capital ("Colony"). Xanadu is a 2.3 million square foot retail complex that was slated to open in November 2008, but remains unfinished due to its inability to replace the $500 million in financing that it lost when Lehman Brothers Inc. and Capmark Financial Group Inc. declared bankruptcy. The Governor is upset that the project has not been completed; wanting the developer to either complete the project or surrender the land which it leased from the New Jersey Sports and Exposition Authority. Recently, Colony has been speaking with Related Cos. in an effort to bring them on as a financing partner.

Colony paid $160 million in advance for the first 15 years of the ground lease and is obligated to pay an additional $95 million through 2026 - a financial obligation that the Governor certainly has an interest in seeing carried out. It seems that the Governor has convened a commission to evaluate whether the New Jersey Sports and Exposition Authority, a New Jersey state agency, can make a land grab due to Colony's failure to complete construction. Escape clauses are standard in commercial ground leases which, in this case, would allow the public party to terminate the contract if the private party is not performing.

Continue reading "Xanadu: A Governor's Quest to Reclaim Northern New Jersey's Unfinished Retail Mecca" »

According to "Flexibility Is The Key", an article authored by Jan Alan Lewis and Iryna Lomaga Carey in the New Jersey Law Journal, the commercial leasing market seems like a tenant's market due to the impact of the Great Recession on small, mid-sized and even larger businesses. Tenants are negotiating with their landlords to receive concessions that range from rent relief in exchange for short-term renewals to tenant improvement allowances and looser assignment and subletting provisions.

Tenants have requested and received: (i) rent abatements or concessions; (ii) contraction of space and (iii) term extensions with delayed rent increases. Landlords should be wary of smaller businesses that may not be able to meet their new obligations, even if they are seemingly less stringent. Landlords should perform due diligence by requesting a business plan from their tenants before granting concessions. This way they can determine whether certain concessions will help to support the tenant's business as a going concern or whether such a concession is merely a temporary extension of a terminal problem.

Continue reading "New York & New Jersey Commercial Leasing Tactics" »