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Real estate record and builders' guide: v. 88, no. 2274: October 14, 1911

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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