Midtown Manhattan and the entire state of California both have problems. Let’s first take a look at Manhattan Is Awash in Sublet Office Space.

Few office towers have been left untouched by the flood of sublet space that has recently inundated the New York office market. In Midtown Manhattan — where many of the world’s largest financial companies are headquartered — three out of every four office towers now have sublet space available.

In Midtown Manhattan, for example, 13 percent of prime, modern, well-located offices — which brokers often refer to as Class A space — was available in April, up from 6.5 percent a year earlier, according to Colliers ABR, a commercial real estate services company. And sublets now account for some 40 percent of the space available in Midtown, compared with 30 percent of the much smaller total that was available a year ago, the company said.

Robert Sammons, the managing director in charge of research at Colliers ABR, said that sublet space in trophy office towers along Madison Avenue and Park Avenue has been leasing for as little as one-third of what that space might have commanded in early 2008, at the height of the roaring market.

“A year and a half ago, this space might have leased for $150 per square foot,” Mr. Sammons said, while he has heard of recent sublets in high-end buildings in this office corridor with annual rents of as little as $40 to $50 a r square foot. “This is the most remarkable turnaround in pricing that I’ve ever seen in such a short period of time.”

In April, two financial companies began offering sublet space at 399 Park Avenue, between 53rd and 54th Streets: Citigroup listed the building’s entire third floor, and Legg Mason listed the entire fourth floor. Each floor covers more than 97,000 square feet.

This month, JPMorgan Chase listed a large sublet at 277 Park Avenue, between 47th and 48th Streets. It amounts to more than 400,000 square feet, covering the 13th to the 17th floors, and the 19th to the 25th floors of this 51-story office tower. This is the largest block of space currently being offered for sublet in Midtown Manhattan.

Gridlock in California


California Stats

  • There has been no increase in organic house sales in California in 18 months.
  • Foreclosure-related resale market at the point of maximum demand.
  • Total sales vs. foreclosure supply is heavily imbalanced.

“Over 50% of all sales are foreclosure related and that is snuffing out demand from other sectors.”

Even though there is massive housing oversupply in California, the homebuilder industry lobbied for tax credits to build new homes.

California Tax Credits For New Home Purchases

Inquiring minds are investigating the California Tax Credit for New Home Purchase program.

This tax credit is available for qualified buyers who on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

California allocated $100,000,000 for this tax credit. Buyers must apply for credit allocation from us. We will review applications and allocate credit on a first-come, first-served basis. Once $100,000,000 has been allocated, the tax credit will no longer be available. We began issuing certificates of credit allocation on May 1, 2009. Please check this page for updates on the allocated and remaining credits available. (Updated 05/15/09)

California allows qualified new home buyers a total tax credit amount equal to either five percent of the purchase price or $10,000, whichever is less. Taxpayers must apply the total tax credit in equal amounts over three successive taxable years (maximum of $3,333 per year) beginning with the taxable year (2009 or 2010) in which the new home is purchased.

California has wasted $65 million of a planned $100 million wastage.

It is beyond reckless to waste money like this in the midst of a fiscal crisis. If you want to know why California is broke and looking to increase taxes, such idiocy is always at the heart of the matter.

Moreover, note that the California credit is on top of the Federal First-Time Home Buyer Tax Credit.

A tax credit of up to $8,000 is available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

There is a massive oversupply of housing and the Federal government and states are attempting to stimulate home building!

The most amazing thing to me in all this is the number of people who blame regulation for the current crisis. The creation of Fannie Mae, Freddie Mac, idiotic programs like these, and the existence of the Fed itself are what regulation brings.

Yet complete fools and many people I otherwise consider brilliant are screaming for more regulation.

Mike “Mish” Shedlock
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