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Manhattan Printers Waiting for Good News

October 1998
NEW YORK—The fate of some of Manhattan's printing industry may well lie with a real estate broker's ability to close the deal.

Approximately 20 to 25 borough printing companies, which have anywhere between six months and three years remaining on their leases, have signed on with broker Insignia/ ESG thus far and more are anticipated.

Procured by the Association of Graphic Communications (AGC), Insignia/ ESG is attempting to find sufficient space for the caravan of printers and other businesses, which face exile from landlords who chose to lease space at a higher rate to office-type businesses rather than heavy-equipment manufacturers. Presently, Insignia/ESG has 350,000 square feet for relocation, with more space expected to be added as additional printers, finishers, heavy manufacturers, etc., join the fold.

A boom in the Manhattan real estate market is at the heart of the problem for printers. Landlords, seeing space leasing as high as $30 per square foot for office environments, are turning away their heavy-machinery tenants at the conclusion of their leases, which called for rates below $10 per square foot per year.

As demand for real estate in Manhattan increases, so does the likelihood that printing activity will move to the brink of extinction in the borough.

Insignia/ESG Managing Director Michael Geoghegan hopes to find new accommodations for the printers before the leases expire. He is currently negotiating with a number of landlords. His goal is to have a deal in place before the end of the year.

"We expect to do something over the course of the next couple months," he says. "We'll really have to do that to meet landlord schedules because if we don't step up and take advantage of the opportunities, someone else will."

The main opportunities appear to be sites on 26th Street—the Starett-Lehigh building—and 11th Avenue. Regardless of the venue, Geoghegan says space—more than enough to accommodate the displaced tenants—will be addressed on a first-come, first-serve basis.

Geoghegan cautions that apathy among printers could have serious consequences. He feels printers should get involved in the process long before leases expire, for the real estate trend has long-term ramifications for the industry.

"If we all hold our ground, we can stake a claim for ourselves," Geoghegan says. "This is a wake-up call for the printers to push the city, push the landlords and push the brokers."

He added that, given the dynamics of the negotiations, which could prevent a quick deal, printers in Manhattan with leases terminating soon should be prepared to move.

"For them not to be looking for space is going to put them in a bad position," Geoghegan says. "We find that tenants who have very little time left on their leases are at a very disadvantaged position with the landlord because they have so few options and they can't develop options."

He says those who can stay aboard with Insignia/ESG are going to get "the best economic deal in Manhattan. And if that's not low enough, then we'll develop opportunities outside of Manhattan.

"But I believe if we work in unison, and work with the city, the state and with the landlords, then we'll be able to put together something that makes sense."

How much space will cost remains to be seen. Bill Dirzulaitis, president of the AGC, doesn't believe it will be secured for less than $15 per square foot per year.

Several factors will be taken into account, he says. The incentive package, along with city and state aid, as well as other types of financial support, figure prominently in any deal.

Dirzulaitis feels it is important for the companies to have a deal finalized within a six-month period—by the end of the first quarter in 1999.

"If companies go out of business, you'll have an awful lot of unemployed skilled workers. Where's a bindery worker going to go, McDonald's? The jobs are not transferable to other industries, in most cases."

Frank Figliola, president of Sterling Mounting & Finishing Co., understands the severity of this issue. His lease expires Jan. 31, 1999.

Even if Insignia/ESG is able to come to terms with a landlord by the end of the year, it may not be in time to aid Sterling Mounting & Finishing.

"A lot of people besides myself have come across the same problem," Figliola says. "They either stay and pay 50 percent more and above or they have to move. And if you move, where do you go? If you're a large corporation, there is no place to go. I require 20,000 square feet—where do I go?"

Figliola is in the fold with Insignia/ESG. If the broker can't help him, Brooklyn is an option. Crossing the Brooklyn Bridge might be too risky a step, however, as could a move to New Jersey or anywhere outside the borough. Customers are finicky.

"I can move to Brooklyn tomorrow, get $6 per square foot, a grant from the city development corporation and I can get some tax credits," Figliola says. "But would my customers follow me?"

Herb Blum, vice president of Blum Printing, is on AGC's board of directors and co-chairs the committee that aided in selecting Insignia/ESG. He has fewer than four years remaining on his company's lease and is not optimistic that Insignia/ESG can close a deal in the near future. He doesn't expect any action before the first of the year.

Still, Blum predicts Insignia/ ESG will land the printers an attractive package.

"I believe what we'll see happen is some companies moving out of Manhattan and some merger and acquisition activity," he says.

"Some will wind up shutting down. There's a lot of people, including us, running old equipment. To move this stuff doesn't make sense and to buy new equipment may not make sense, either, because the capital investment is so huge."

By Erik Cagle


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