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Buyers in Manhattan's booming building sales market are suddenly becoming cautious.
In recent weeks, prices have begun to drop for office towers with vacancies or looming lease expirations-issues that investors pointedly ignored earlier in the year.
Dissatisfied sellers are yanking these buildings from the market, or working on deals at significantly lower prices than they had expected to get.
The properties that are now drawing the biggest dollars have full rosters of creditworthy tenants, and no vacancies or significant lease expirations coming in the next three years. Investors 'are paying substantially more than $500 per square foot for skyscrapers with these characteristics, a price level that harks back to the heavy-spending Japanese investors of the 1980s.
"We're seeing a real bifurcation in demand between fully leased properties and those with rental risk," says sale broker Richard Baxter, an executive managing director at Insignia/ESG Capital Advisors.
The trend of more careful buying will prevail for the year to come, real estate executives predict. This change in investors' behavior signals their pessimism about the city's economy. They think office rents won't rise until 2005 because businesses won't start growing again any time soon.
Moreover, they're upset about Mayor Michael Bloomberg's 18% hike in real estate taxes. It will hurt the purchasers of properties with vacant office space the most, because those buildings have fewer tenants to which owners can pass on the increased costs.
Earlier in the year, buyers disregarded Manhattan's eroding leasing conditions. A scarcity of buildings for sale post-Sept....