2015's Been A Banner Year for NYC. Here's Why.
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This year’s on track to smash commercial real estate records in NYC. Panelists at Bisnow’s NY State of the Market event Thursday at 4 Times Square broke down where things are, how we got here and what to expect. Hightower CEO Brandon Weber says what’s unique about the current wave of commercial real estate tech is a lot of it’s being developed by practitioners who know where the pain points are in curating and using mountains of data. Before doing tenant and landlord rep at CBRE, Brandon helped build Excel for Microsoft. But he says it’s ridiculous that so much of the industry still relies on non-collaborative platforms like Excel, which aren’t designed for crunching commercial real estate numbers or allowing for collaboration. With $1.4B projected investment this year (up from about $1B last year), Reonomy CEO Richard Sarkis says tech’s having its moment but that a wave of consolidation and companies that don’t work dropping off the scene is likely in store. Snapped: Onyx Equities managing principal Jonathan Schultz, CompStak CEO Michael Mandel, Brandon, Rich, and Honest Buildings Geoffrey Lewis.
The shape of office leasing’s in flux too, says Durst Organization SVP Tom Bow. Case in point: Tom says in Manhattan there were 30 office deals of 100k SF or more and eight of over 400k SF, just in Q3 ’14. Fast forward a little over a year: YTD 2015, there have been just 18 deals over 100K SF and only two over 400k SF. He points out that leasing’s still robust, but we’re entering an era when marquee HQ moves are not likely to be as common as a steady trickle of smaller startups scaling up but rarely taking monster footprints. Speaking of startups, Colliers NY Tri-State president Michael Cohen notes that while WeWork’s recent big shot in the arm shows promise, he’s wary of landlords uncritically drinking the co-working Kool-Aid and wonders how long the party’s going to last. Snapped: MHP president David Greene, Michael, Tom.
Hunt Mortgage Group senior managing director William Hyman had stats at the ready to help us evaluate where things stand on multifamily. Since 2010, he says, there’ve been 12.5 million new jobs added nationally, and in that same time Millennials have chopped their unemployment rate of 2.5% above the national average in half. As of July, NYC added around 100,000 new jobs year-over-year, a feat William says was only bested by Dallas. It’s a recipe for serious demand. On the supply side, says Greystone Bassuk EVP Drew Fletcher, keeping the pipeline flowing will be a challenge in the face of high land and construction costs and nagging uncertainty around 421a. Projects need more equity to get done than they used to, so Drew says we should expect to see more EB-5, mezz and deals done through JVs and ground leases. Snapped: William and Rose Associates chief development officer James Hedden.
On the investment sales side of things, longtime owners are unloading properties they’ve held for a long time, with 1031 exchanges accounting for a big chunk of them, says Herrick Feinstein real estate chair Belinda Schwartz, who moderated. Cushman & Wakefield's Bob Knakal says these days those buyers are often looking outside of NYC, with around 75% looking for NNN opportunities. What’s new, Bob says, is that in the past three to four months he’s seeing more sellers content to pay the tax they owe after a sale and hold off on reinvesting in more property. He points out that the average cap rate in Manhattan is under 4%, and with interest rates about as low as they can go, a lot of sellers don’t see a nice payday as a reason to turn around and give someone else their own payday when the upside’s uncertain and eventually interest rates are likely to go up. Snapped: Blackstone global head of real estate debt Mike Nash, Bob, Belinda, Meridian Capital Group chairman and CEO Ralph Herzka, Hidrock CEO Abraham Hidary.
Retail’s in the midst of earth-shaking changes in NYC—and more than anywhere else, the earth at the lower end of Manhattan, says Witkoff partner Sherri White. The area now has a 24/7 population that’s younger and more sophisticated than 15 years ago, she reminds us (and we at Bisnow see it every day, as we recently moved our HQ to the area). Between the South Street Seaport’s 400k SF of retail in the pipeline, Brookfield Place and Westfield World Trade Center’s retail complexes, Shari says we’re only starting to see the potential of the Financial District. Crown Acquisitions COO Brittany Bragg says Brooklyn’s on the cusp of a huge retail boost of its own, but it’s not there yet. National retailers have been slow to open there, she says, but Downtown Brooklyn’s 23 million annual transit riders and big retail-centric projects like City Point coming, we’d do well to start thinking of it as one of the next major retail districts, she says. Snapped: Sherri and Brittany.