Commercial real estate brokerage is a multi-skilled profession involving both fast-paced transactions and tending to buildings and their owners. At least that was the case until Hurricane Sandy struck Lower Manhattan and the New Jersey coastline on Monday, October 29. Since then, flooding and power outages have brought virtually all transactions to a halt, and in the storm’s aftermath, brokers are spending most of their time dealing with building cleanup and repairs as well as relocation of tenants—and often they’re doing it amid less than professional-standard circumstances.
“There’s nothing that sends a message about vulnerability like a storm,” notes Barbara Byrne Denham, Eastern Consolidated’s chief economist.
Byrne was referring to flooded office buildings, whose values she believes will be impacted by the storm, but she may as well have been talking about real estate brokers themselves. Since the hurricane hit, brokers based in both New York and New Jersey have been soldiering on despite disruptions in power, Internet, phone, transportation and project timetables—in other words, every aspect of professional life—both in the office and at home.
As of Nov. 7, Jones Lang LaSalle’s research showed that out of a total inventory of 183 class-A and class-B office buildings containing 101,175,754 sq. ft. of rentable space in lower Manhattan, 44 buildings and 33,222,387 sq. ft. of space remained closed—down from 49 buildings and 34,988,627 sq. ft. which were closed as of Nov. 5.
Another indicator of the impact of Sandy on New Jersey’s commercial real estate industry was the lack of auctions taking place during the week after the storm hit. Max Spann, president and CEO of Max Spann Real Estate & Auction Co., based in Ventnor, N.J., postponed 15 auctions until later in November including for development parcels, new construction, mixed-use commercial buildings, luxury homes and waterfront condos.
The offerings were in Bergen, Atlantic, Cape May, Ocean and Monmouth counties. Spann says additional open house tours have also been rescheduled, and sellers are now in the process of repairing damage to compromised buildings.
“It’s just been a dead week—and surreal,” says Christopher B. Marx, a senior managing director with commercial real estate services firm Studley. “It definitely is causing people in my office to be put into a holding pattern.” In the wake of the storm, Marx says, the firm’s Hackensack, N.J. office, where he is based, closed down completely due to power outages.
Working from his home in Ridgewood, N.J., where power returned this week but downed trees remained in the streets, and where Marx’s family took in up to 16 displaced friends each night, Marx says he focused on the occupier side of his job—scrutinizing backup power and long-term leases and touching base with clients.
On the job, says Marx, “Everybody I’ve talked to—and I’ve been on the phone from dawn to dusk—says that companies are scrambling for [relocation] space, because even though they may have power and Internet and phone back, they may not have heat. But generally, cooler heads prevail and people say, ‘Okay, we’ll just ride it out for a couple of days.’
As of Nov. 7, power and other utilities were also still out in Cassidy Turley’s Somerset, N.J. office so the New Jersey team was working out of the firm’s facilities in Parsippany and Rochelle Park, says Managing Director Raymond Trevisan.
However, despite projects being put on hold and colleagues having to withstand the pressures of “working with [clients] nonstop to find solutions for their real estate and facilities needs” within an “extraordinarily challenging environment,” Trevisan says his team is holding up well.
Displaced from commercial real estate services firm Cushman & Wakefield’s Lower Manhattan office to its Midtown office, Executive Director Bob Constable says his biggest concern is a lack of communication.
“A lot of the buildings downtown are being repowered, with the exception of the buildings that were flooded along Water Street, which you can expect to be down anywhere from two weeks to two months depending on the level of damage and where their systems are located,” he says. “But while Con-Ed has been very good at communicating their progress in getting buildings restored, it’s a little bit more unknown when heat will be restored or when Verizon will restore telephone service. That’s tough if you’re a big company that has 200,000, 300,000 or 400,000 sq. ft. or more—how do you make contingency plans?”
With the timetable still unknown for restoration of city-generated steam for heat and telephone service from Verizon, Constable says he is finding that clients are unsure whether to relocate to temporary offices. “The chances of getting Verizon to wire you temporarily for phone service for a short stay are slim,” he says. “Verizon is busy repairing its own network.”
Instead, many of his clients are “bootstrapping off affiliates or other offices … bunking with clients or customers or other offices in their company network,” he says. That includes Constable’s own downtown team. While he says he misses his files and having calls forwarded is helpful but not ideal, the business is proceeding, including damage assessments of the firm’s inventory downtown.
Sean Black, a vice president at Jones Lang LaSalle, lives just a block from his firm’s downtown office. Although he endured a weeklong blackout, he escaped water damage in both buildings, but still notices the strong smell of fuel from flooded garages and describes walking down the street to his home as “a little post-Apocalyptic.” Working temporarily out of his home on his cell phone as well as JLL’s Midtown office due to a continued lack of heat in the downtown office, Black says he has seen his industry respond “incredibly well” to helping the many tenants impacted by the blackout that occurred below 39th Street.
“The thing about real estate is that when anything like this happens, it’s either the attorney or the broker who gets a call,” he says.
In Black’s case, the call came on his smartphone late in the evening on the night the storm hit from FourSquare, the location-based social networking website for mobile devices, which Black had previously helped relocate to 56,000 sq. ft. in Lower Manhattan. The firm’s building had flooded, the power had gone out and a new temporary home was needed to keep the company up and running.
“I had to contact space providers, many of whom were at home or out of the country, and we set up space tours late at night,” Black says. “We were turning on dimes. We had a midnight space tour and were negotiating occupancy solutions and leases until 1:30 in the morning, but we got them into space for the next day.”
J.D. Parker, vice president and regional manager of Marcus & Millichap’s Manhattan, New Haven and White Plains, oversees 100 agents, half of whom lost power in their homes in New Jersey, Connecticut, Long Island and New York City’s five boroughs in the wake of the storm. In each office, the servers were powered down to protect against lost of data. To top things off, both the White Plains office and the Manhattan office, located at 270 Madison Avenue at 39th Street, lost power for a week.
In addition, Parker reports that several closings scheduled during the week of the hurricane still have not occurred. “We are fortunate in that none of those properties that we had in contract or on the market had extensive damage,” he says. “We had a number of them that could have sustained damage in storm-affected areas, and most of the banks, as well as the clients, wanted engineering inspections to ensure that there was no damage or flooding.”
If Hurricane Sandy has a silver lining, it may be that real estate professionals are rethinking disaster readiness.
“This is New Jersey, so you know we’re going to rebuild both stronger structures and communities,” says Cassidy Turley’s Trevisan.
Cushman & Wakefield’s Constable says he recognizes that “there are engineering challenges that are unique to every building, and obviously we need to get critical systems up above flood level.
“We all know the previous high was 11 ft. and the federal guidelines were to be prepared for an 11-ft. surge,” he explains. “But here we got a 13.5-ft. surge. I think to reference the expression ‘a perfect storm’ is a bit of a cliché, but this was an unprecedented storm that hit the coastline at a full moon high tide. It was a conspiracy of events that made it as bad as it could possibly be. The challenge for engineers who are going to look at individual properties is how to defend their critical systems.”