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Vol. LXXXVIII
OCTOBER 14, 1911
No. 2374
THE PROSPECT AS VIEWED BY DIFFERENT TRADES
Many Brokers Think the Town is Overbuilt, but Merchants and Manufacturers
Say There's a Scarcity of Premises Adapted to Modern Business Requirements.
AT no time in recent years has opinion
concerniag the real estate prospect
been go unsettled as it is just now. It is far
more luncertain tlian it was after the panic.
There was a good deal of liquidation
in real estate during the half-year imme¬
diately following the panic, tout when once
the banking situation had righted itself,
plenty of buyers were in the marliet to
pick up bargains. When tlic licjuidation
was over, it was found that forced sales
had been few in number, compared with
earlier Jiciuidations after major panics. It
was found, also, iliat, save in tiie case of
costly town residences, property had
brought fairly good prices.
The p^nic, in short, had not disturbed
confidence in the earning power of real
estate, 51 confidence resting on tlie ex¬
pectation oE continued expansion of popu¬
lation and industry. During the preced¬
ing ten years, the growtli of New Tork
and the consequent advance in real estate
values had been unprecedented. It looked
as if tha effects of the panic would be
short lived. The agricultural sections re¬
mained prosperous and no one doubted
that the general industrial tendencies
which had insured a marvelously rapid
growth fpr New York in the preceding
decade were of a permanent character.
Of these tendencies, tlie most important
was that toward larger business units—
toward consolidation of business concerns
'into large corporations.
Tliere was, too, a special and local rea¬
son for confidence in real estate invest¬
ments. The credit supporting such in¬
vestments was stronger than it had ever
been in the past after any major panic.
The title companies liave grown to be a
controlling factor in the mortgage loan
market, Tiiey have taken over a large
part of the building Joan business. They
have opened up a national market for
guaranteed mortgages and mortgage
bonds, and were, through the sale of
such securities, gathering together idle
capital from all parts of the country for
investment here. The title companies, un¬
like the old building loan operators were
in no need of calling in loans. On tlie con¬
trary, they were in a position to assist
a,nyoiie who could offer acceptable se¬
curity. The influence of the title com¬
panies was perhaps decisive in sustain¬
ing real estate values at a time when
stock market values were crumbling.
UNFAVORABLE DEVELOPMENTS.
The speculative temper as regards real
estate has remained unsliaken until with-
ing the last few months. But a number
of things have happened lately to Ibring
about a change in sentiment. About three
months ago a warning was issued by the
president nf tlie largest building company
in the city to the effect that there were
too many, office buildings under construc¬
tion. The apartment house renting sea¬
son turned out unsatisfactory with re¬
spect to certain grades of apartments.
For the first time, builders of coKltly
apartments in the fashionable residence
district east of the Park were impelled
to offei- "free rent," in some instances
for as much as two months; concessions
in rent were made as a matter of course
in other apartment liouse districts. In the
new midtown section also, the wholesale
and factory building section, tenants were
refusing to take quarters at the rents
theretofore obtained.
Meanwhile, the General Arbitration
Agreement having been dissolved, labor
disputes of a threatening nature arose in
the buikling industry. Later, a break in
cement prices occurred and other struc¬
tural materials, including steel, took a
downward turn, indicating that not only
New York 'but the country at large had
been overbuilt. In this situation, tlie
principal lending institutions announced
last week their intention to discourage
further building for a time. The import¬
ance of ths announcement is unmistak¬
able in view of the fact that there is a
plethora of funds in the New Tork banks.
The developments noted in the foregoing
paragraphs, coupled with the heavy stoclv
market liquidation of recent weeks, have
had a decided effect on the demand for
real estate. The present is normally a
time of rising activity, but the record of
sales this week is typical of the midsum¬
mer vacation period rather than of the
Fall brokerage season. Do conditions call
for the extreme reaction of opinion that
has taken place concerning the prospeci
in real estate? It is seen now that the
unqualified optimism wiiich lias until re¬
cently prevailed since the panic was
founded on bad judgement. Is better
judgment shown in the present extreme
revulsion of sentiment?
In order to form a competent opinion
on" the real estate situation in a town
like New Tork. it is necessary to consult
a variety of sources of information. The
Record and Guide presents in the follow¬
ing pages file views of accepted authori¬
ties in many lines of business that have
to do, directly or indirectly, with real es¬
tate. The purpose in collecting the in¬
formation has been to discover, first,
what the facts are as regards overbuild¬
ing and, next, what the conditions of
business are in the wholesale and manu¬
facturing trades that are the biggesit
users of space in Ioft and offlce buildings.
Certain conclusions may be mentioned
here which are likely to appear just to
anyone who reads the forty odd inter¬
views that follow. There can be no doubt
that too many high-priced apartments
have been erected. This is true mainly,
however, of apartments intended to take
the place of private houses and known
as "apartment dwellings," Builders have
evidently made the mistake of assuming
that families unhoused by the demolition
of dwellings in the midtown section to
give room for mercantile constructions
would maintain the same style of living,
reckoned by yearly expenditure, in a rent¬
ed apartment as they had been accustom¬
ed to in private dwellings. As a matter
of fact, a large proportion of such fam¬
ilies have preferred buying in the suburbs
to moving into apartments-
THE SUBURBAN MOVEMENT.
About twelve hundred buildings are
being torn down each year in Manhattan,
perhaps a majority of which are dwell¬
ings. Add to this the large number of
dwellings that are toeing remodeled into
business premises, and it will be seen that,
coupled with tiie normal increase of pop¬
ulation, there should have been a very
considerable demand for large apartments
of the expensive order, provided no un¬
foreseen tendency had developed to take
well-to-do people out of the city. Just
such an unforseen development accounts
in a measure for the present oversupply
of large apartments of nine rooms or
more each.
Builders will have to recognize what
they have been unwilling to admit here¬
tofore, namely, that well-to-do people in
growing numbers are seeking the suburbs.
There are no shrewder buyers of reai
estate than people of means looking for
homes. They bought town residences
when these were advancing in value and
they are novi' quite well aware of the
fact that as a rule the biggest advances
in residence property will be found here¬
after in the subunbs. IVIeanwliile people
wlio live out of town are frequently de¬
sirous of keeping a small apartment in
the city. Tbere is at present a very
extensive demand for apartments of two,
three and. fltmr mooms Milch 'builders
have, perhaps purposely, overlooked. We
need not go into the technical, objections
builders have against small apartments.
It will be enough to say that when sucli
apartments are bringing .$40 a month a
room, while many large suites remain
empty, builders will probably overcome
their traditional prejudice against small
apartments.
The oversupply of offiee buildings is
admittedly very considerable. Here also
builders have been disappointed in ex¬
pectations based on past experience. The
chief cause of the marvelous growth of
papulation and industry in New York and
of the advance in real esiate values dur¬
ing the decade preceding the panic was
the consolidation of ibusiness enterprises
into large corporalions.
Large corporations, having outgrown
the banking and stock market fa¬
cilities of lesser flnancial centers, moved
their executive headquarters to New York.
The immigration of out-of-town corpora¬
tions was on a large scale and created a
notable demand both for offlce accommo¬
dation and for costly residence housing,
including, of course, apartments. Recently
the tendency toward business consolida¬
tions has been checked by the trust bust¬
ing zeal of the Federal government and
there has not been the demand for offlces
that builders had grown accustomed to
count on during the ten years between
ISQl and 1007. There is no section of the
community that is more vitally affected
by the agitation against large corporate
enterprises than New York.
OFFICE DEMAND AND TRUST BUST^
-ING.
This agitation has, of course, affected
the demand for mercantile buildings also.
However, loft buildings are influenced by
a local factor of determining importance
There is reason to believe that the pres¬
ent surplus of lofts in the midtown dis¬
trict will be quickly taken up. The repre¬
sentatives of the different wholesale and
manufacturing trades whose views are
quoted in the following pages call atten¬
tion to the general desire of downtown
merchants and factory owners to move
on account of the congested shipping
facilities and antiquated buildings in the
locations where they now are. Most of
them are in fact, getting out of the old
trade centers as fast as their existing
leases expire.
Whatever oversupply there may be of
mercantile buildings in the midtown dis¬
trict is not likely to be of long duration
particularly if, as seems probable, the
production of such buildings is to be
checked for a time. The main cause for
disquiet in regard to the new loft build¬
ings in the midtown district is the re¬
action which they produce in the aban¬
doned trade centers. The structures there
are being occupied, it is true, but by ten¬
ants of inferior purchasing power or less
secure flnancial position. They are coa-
sequently depreciating hi value. This was
made conspicuously apparent at an
auction sale held a few days ago, at which
several mercantile premises in middle
.Broadway, offered by an estate, realized
one-third less than their assessed valua¬
tion on the tax books.
The building statistics for the last half
a dozen years throw a helpful light on the
real estate situation. The statistics of
tenement house construction, for example
bear out what was said in an earlier
paragraph, namely, that the oversupply
of "tenements" is conflned chiefly to high-
pnec apartments intended for large house¬
holds.
STATISTICS OF TENEMENT HOUSE
CONSTRUCTION.
The following tables, obtained through
the courtesy of Tenement House Commis¬
sioner Murphy, show the amount of con¬
struction work planned under the Tene¬
ment Hou.'Je Law since 1902. In making
up the figures all duplicate, abandoned
and superseded plans were deducted. The
figures consequently represent the actual
volume of construction undertaken and
the plans for new work in force at pres¬
ent.
1002.
Number of Apart-
Fundings. Cost. ments.
Manhattan...... 25!) $lr;,252 OflO 5 700
Bronx........... 72 l.'nn.fiOO ' 74!)
Brooklyn........ ISO L.SSfi.TnO 928
Queens.......... 51 202.500 199
Richmond....................
Total.......... 562 $19,080,200 7,582