The 2017 Real Estate Industry Executive Forum, one of the premier events of its kind in the New York City (“NYC”) Metro Area, brought together some of the region’s leading real estate executives, business owners and investors for a morning of sharing action-focused best practices and market insights.
The morning’s discussion tackled a number of important market dynamics that are currently on the minds of real estate executives, business owners and investors, including the general outlook of the NYC metro real estate landscape, economic factors affecting the market, and where the local real estate market stands in comparison to other locales around the world.
Berdon LLP Co-Chair of Real Estate Services, Seth Molod, CPA, kicked-off the event by unveiling the results of the 2017 New York City Metro Real Estate Market Survey (click here to view the complete survey report), developed by Berdon LLP and Bloomberg. Molod highlighted key results from the survey of over 130 real estate executives before introducing a distinguished panel that continued the discussion and provided their insight on the survey results and other industry related topics.
The distinguished panel of real estate experts included:
Beware the Black Swans
The panel was moderated by Berdon LLP Co-Chair of Real Estate Services, Maury Golbert, CPA, J.D., LL.M. who began the proceedings by asking should people worry about a downturn in the real estate market, despite the generally positive economic picture.
Among the panelists, there was broad agreement that barring any ‘black swan’ events—such as an oil shock due to unforeseen events in the Middle East—the economic picture in the U.S. is stable.
Forest City New York’s MaryAnne Gilmartin mentioned that, “black swan events aside,” with continuing job growth and with people flocking to cities, the real estate market is “slow and steady.” She added, “Many of us like that ‘slow and steady’ and would take that all day long over some exuberance that has some inevitable end to it.”
MCR Development’s Tyler Morse agreed, and noted that the market is in a “nice equilibrium,” which “could go on for some time baring an exogenous event.”
Norman Sturner of MHP Real Estate Services also concurred, stating “the market is still vibrant.”
Adding insight on drivers that are aiding the U.S. investment market, Golbert recognized the impact on foreign investors and highlighted three main factors that make the U.S. economy a magnet for foreign investment: (1) real estate, (2) the quality of healthcare, and (3) the country’s unparalleled higher education institutions.
While he agreed that the U.S. market has “enormous strengths,” RXR’s Seth Pinsky cautioned that while the U.S. market has “enormous strengths” the industry faces three challenges: the first is the fact that real estate is a “cyclical industry”; second, there is what he described as “a capacity issue” due to a lack of investment in infrastructure; and finally, because of what he described as an “extremely dysfunctional” federal government, investors must take into account the “low probability” that a black swan event may, nevertheless, occur.
The panelists felt that the outlook for the NYC Metro market is bright. The consensus of the panel was that, in the words of Pinsky, “the long term trends favor New York.”
“Record employment, record population, record visitor-ship,” said Pinsky, put the NYC Metro market in a strong position.
MHP Real Estate Services’ Norman Sturner noted that 20 million square feet of commercial real estate is set to come on line in the city within the next 3-5 years. For Sturner, the New York market remains “the shining light on the hill.”
Likewise, Gilmartin declared, “New York is open for business - for sure.”
Touching on the market for office space, AXA’s Nicki Livanos offered her thoughts on the future of office space in the NYC Metro market by highlighting how generational preferences continue to shape development. Specifically, she mentioned how developers are increasingly designing spaces that provide “a better mix of open versus quiet,” in order to appease Baby Boomers, who prefer spaces that offer more privacy, and Millennials, who “love open space and have no problem concentrating and being productive” in an open concept.
With regards to investment and development in the greater metropolitan region, Pinsky sees opportunities around transit hubs, specifically in Yonkers, New Rochelle, Hempstead and Glen Cove, and noted that, in addition to having the benefit of historic downtowns and walkability, the commute into Manhattan can be often be faster from these places than from the New York City boroughs.
NYC: A Global City in a Global Context
Kathleen McCarthy, Senior Managing Director and Global Chief Operating Officer of The Blackstone Real Estate Group, gave the Forum’s Keynote address. Noting the “incredible resiliency” of the NYC Metro market, McCarthy described the local market in a global context and believes “the way to generate outsized returns is to see the world a little bit differently than others.” Blackstone, she said, invests thematically, with a focus on demographics—taking “themes and [exporting] them around the world.” The types of investments Blackstone makes in New York, said McCarthy, it also makes in other cities across the globe, such as Sydney, Tokyo, Copenhagen and Stockholm.
Given the demographic trends currently shaping the global market, Blackstone invests in cities where young, creative, and tech-oriented minds are heading. In the U.S., this means investments in cities like New York, while abroad investment opportunities are becoming more prevalent in cities like Berlin, Stockholm and Sydney.
Closer to home, McCarthy touted Manhattan’s newly revitalized downtown, noting that over the past decade, the area has seen $30 billion in public and private infrastructure investment. Owners and developers are, she said, turning downtown into an “open 24/7, live-work-play-shop-kind of community.” The influx of tenants from the tech and fashion worlds, she added, shows that downtown “is not just for financial services anymore,” and proves "the power of place, [and] the importance of infrastructure.”
McCarthy concluded the morning on an environmentally friendly note.
When looking at new investment opportunities, McCarthy encouraged investors and developers to consider ways to protect the environment. As an example, she pointed to Stuyvesant Town, where Blackstone preserved 5,000 units of middle-class housing as a kind of laboratory for impactful environmental programs, such as solar energy, which will alone triple Manhattan’s capacity for solar power generation.
Blackstone’s experience with Stuyvesant Town has led McCarthy to conclude that real estate investors and developers can indeed, as she put it, “turn the tide on sustainability…[and] do well, by doing good.”