Brookfield moves focus from Acquisitions to Development

As office tower prices continue to rise, Brookfield Property Partners has decided to develop a prodigious $2 billion glass tower, and avoid acquisitions for a while. In fact, rising office building prices in Manhattan has motivated many landlords to choose development over acquisitions. CEO of Brookfield’s office division, Dennis Friedrich points out the advantages of development in expensive markets such as New York City. “If you have a pipeline of development and you can develop below where assets are trading, it makes the investment decision easier.” Right now, the company is working on eight million square feet of development around the world.

Brookfield is not the only company that is participating in this trend. Boston Properties is selling Manhattan and Boston towers in order to develop office towers in San Francisco. In addition, Kilroy Realty Corporation has been on a West Coast development spree to compensate for high office prices in Los Angeles. For many landlords, the decision is simple. With cap rates in New York around 4% to 4.5%, returns from acquisitions are measly compared to developments bringing in 7% to 8% in annual returns. Cap rates are similar to bonds in the way that returns decrease as prices increase. Since office building prices are on the rise, cap rates in major cities are steadily decreasing. 

Brookfield’s glass tower, called 1 Manhattan West, includes two million square feet, with 550,000 square feet already leased. The glass tower faces competition nearby, but the company is confident because of the small amount of development in Manhattan. Although companies are getting out of acquisitions and into development, Brookfield isn’t entirely out of the acquisitions market. The company recently acquired Canary Wharf in London, and is now working on acquiring a minimal amount of U.S. towers.

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Virginia MacKoul

Virginia is a graduate from the University of Florida's College of Design Construction and Planning with a degree in Sustainability and the Built Environment, and a minor in Urban Regional Planning. Virginia joined the Front Street team in 2011, as an intern. Upon graduation, Virginia joined the Front Street team full-time as the Director of Client Services. Ms. MacKoul’s addition furthers Front Street’s continued growth and expansion within Gainesville and other North Central Florida markets. She was promoted to Director of Marketing in 2014 and now manages the firm’s team of interns and oversees all marketing and branding activity. Virginia was born in Boston and moved to Lee County, Florida in 1997. Virginia graduated her high school's International Baccalaureate program and started at the University of Florida with a focus on Architecture. Virginia shares Front Street's passion of giving back to the community and those in need. Virginia's hobbies include photography, cooking, football, movies, music, and spending time with her dog, Brinkley.

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