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Broad Financial Center, the 400,000-square-foot tower that's home to the National Association of Securities Dealers, was built by Howard Ronson seven years ago. Like scores of Manhattan office buildings built by developers who overestimated the need for space downtown, Broad Financial Center quickly fell into trouble. By 1990, Mr. Ronson had to turn title over to the Bank of Nova Scotia, which held its mortgage. It was 30% vacant at the time.
The foreclosure was bad news for Mr. Ronson. But it has given Broad Financial a new lease on life. With money to spend on tenant improvements, building upgrades and brokerage commissions, the Bank of Nova Scotia was able to reposition the building and make it competitive even in the depressed downtown market. It is now 87% occupied. With more leases pending, it should be 91% full by the fall.
Not all foreclosures have such positive outcomes. But brokers say the new institutional owners that have stepped in to replace troubled owner/operators have brought a sense of stability to the downtown office market. in the better buildings, leases are being signed, and for the first time in about a year, more space is being absorbed than dumped back on the market.
"If this leasing velocity continues, prices will begin to firm up by the third quarter," says Stephen Siegel, president of Edward S. Gordon Co.
That would be good news for the downtown market, which has been brutalized in recent years by both the consolidation of financial services and a flight to more attractively priced space from midtown to Tampa. Vacancies even in class A space have soared to 18%. In class B and C space, the range varies from 25% to 60%. Prices have dropped...