RECESSION EFFECTS ALONG THE GREAT
LAKES Part Two: Michigan, Ohio, Pennsylvania and New York
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The Great Lakes states of Michigan, Ohio,
Pennsylvania and New York have not been
immune from the effects of the U.S. economic
downturn and credit and crisis. The region has
not hit the lows that many other areas across the
country have reached, but economic progress
has been sluggish, at best.
In New York, the greater metropolitan area
(the populated areas in the states of New Jersey,
New York and Pennsylvania that are within a
typical commuting distance of Manhattan, N. Y.)
is laboring under a nearly 10 percent unemployment rate. The state government is enduring
its own fiscal challenges, further slowing down
development in the state, especially in Albany
and other upstate markets where the state
government, as well as vendors and service providers, is a prime tenant of office space.
Yet, activity in the real estate markets has
begun to pick up recently. September was the
THANKS TO THE
TOWER 31, A
HIGH RISE IN
MIDTOWN, N. Y., IS
THE LAST LARGE
GROUP HAS COMPLETED. IT WAS
FINISHED IN 2006.
fourth consecutive month of one million square
foot plus leasing activity in Midtown Manhattan,
according to CB Richard Ellis, AMO®. And the
decline in asking rents has slowed significantly.
Still, major new real estate developments
have been mostly on hold as the credit markets
remain stingy with financing. Matthew Baron,
a principal with Simon Development Group,
owns $300 million of property in the New York
metro area. His last large new development was
a 42-unit rental high rise in Midtown named
Tower 31, which was completed in 2006—just
before the economic recession hit.
“The problem is leverage today,” Baron said.
“You can’t get construction financing. When
you don’t have it, you wipe out 95 percent of
the people out there who are going to be doing
In this environment, the focus is on tenant
retention, according to many real estate experts.
Re-leasing is an expense most owners can’t
afford right now, so property managers must be
proactive in the area of customer service to keep
tenants from moving.
“It’s a tough environment out there,” Baron
said, “so you can’t be the grumpy landlord who
is not responsive to tenants. Understanding that
is very important.”
Pennsylvania’s real estate markets did not
undergo the huge buildups that occurred in
other regions, so the area is not enduring as big
a shakeout. Still, the metro areas of Pittsburgh
and Philadelphia are struggling with rising
unemployment rates. And while smaller banks
are starting to lend money to local businesses,
large-scale financing for major developments is
still proving difficult to obtain.