Demand Eases for Office Buildings in Manhattan

Manhattan office buildings no longer look like the sure bet they did just two months ago, with prospective buyers unsettled by the stock market’s slide cutting bids as much as 20%, real estate brokers said.

As a result, some building owners have taken down “For Sale” signs, giving up for now on plans to cash in on what had been a red-hot market before overseas financial shock waves reverberated here.

“Rather than accept lower bids, with interest rates now as low as they could be, they are refinancing their properties,” said Mark Weiss, a senior managing director with Julien J. Studley Inc., a Manhattan-based commercial real estate brokerage.

But the owners of commercial office space are scrounging for new sources of funds because Wall Street powerhouses, faced with mounting losses from Japan to Russia to Brazil, have stepped back from real estate loans.

Credit Suisse First Boston, one of the biggest commercial real estate lenders in the country, started pulling back a month ago, followed by other big investment houses, including Lehman Bros. Holdings Inc. and the U.S. real estate lending arm of Nomura Securities Co.

In addition, lenders who previously accepted down payments of 5% to 10% of a property’s value are now demanding as much as 25% before signing off on a loan, according to Bruce Surry, an executive director at Insignia/ESG, a real estate firm.

How long the Manhattan market for office buildings stalls this time around depends largely on Wall Street’s ability to withstand the pressure of sliding overseas and domestic financial markets.

Fred Wilpon, the head of Sterling Equities Inc., a real estate management development company based in Great Neck, N.Y., said a pullback by real estate investment trusts helped put a lid on skyrocketing prices--for now.

“My view of what is happening is that it’s much too early to tell about any trends of any lasting nature,” said Wilpon.

In fact, signs are already appearing that players with deep pockets are emerging, hoping to capitalize on the soft market.

“I know people who do not have Wall Street financing, rich investors, who still are very active,” said Insignia’s Michael Laginestra. “Some guys believe there is more opportunity because prices are more realistic. My sense is that part of the business is taking a pause, but not everybody.”

Even the first Wall Street firm to retreat from the scene, Credit Suisse First Boston, said it has gingerly resumed making real estate loans in Manhattan.