Real estate brokers and analysts discussed a “remarkable” 2015 for the New York City market at a NYC Real Estate Expo panel on Wednesday, and speculated on whether robust conditions would continue in 2016 and what factors may throw them off course.
Office market performance kicked off the New York Observer’s “Boots on the Ground versus Eyes on the Prize” panel, with David Greene, president of brokerage services at MHP Real Estate Services, describing a “relentless” leasing environment in the city.
Ken McCarthy, senior managing director at Cushman & Wakefield, noted that while leasing in the city “was stronger in terms of volume” last year, 2015 “has been a very strong year” and he expects to see “more of the same” in 2016.
Despite much talk of TAMI tenants driving the city’s leasing economy, McCarthy added that the financial services sector, which comprises “about 11 percent” of the city’s workforce, “is starting to come back.”
From an investment sales perspective, “it’s been preposterous,” said Meridian Investment Sales’ David Schechtman. “I don’t know how many 2.5 caps I’ll be selling in Soho in the next year, but I’m selling them now,” he told the audience.
Marcus & Millichap’s Peter Von Der Ahe shared similar thoughts, saying that “pricing has been very robust” through 2015 and the expectation that those conditions will continue through the first half of next year.
Tim Wang, head of investment research at Clarion Partners, said the city’s real estate cycle has already matured to the point where “all the low-hanging fruits are gone” and investors “have to work twice as hard” to find value.
That stems from the fact that New York “has a lot of wonderful attributes” to investors worldwide, according to Spencer Levy, Americas head of research at CBRE. “From a foreign capital perspective, it is the brand, not just the place.”
Schechtman cited Larry Silverstein’s recent comments regarding his regret having ever sold any of his Manhattan holdings – a sentiment that Schechtman half-jokingly called “a horrible statement for an investment sales broker,” but indicative of how, “liquidity or not, you’re going to make money in New York.”
“There’s no place in the city that is not hip, that is not cool,” he added, using Lightstone Group’s recent $41 million sale of the former Whitestone Multiplex Cinemas in the Bronx to Extell Development – which Schechtman brokered – as an example. “If you build it, they will come.”
But many of the panelists also expressed reservations regarding potential obstacles – namely interest rates, which the Federal Reserve has weighed movement on for a number of months now.
Levy noted that the stock market volatility of this past summer “changed the Fed’s behavior” in regards to interest rates, though the central bank reportedly could take action as soon as December given recent economic optimism.
When asked about fears for the market moving forward, Wang cited “potential mistakes by the Fed” on interest rates, while Von Der Ahe also pointed to “serious movement on rates.”
“That whole sentiment of, ‘Can we regulate more to make it work better’ usually has the opposite effect,” Von Der Ahe said.