Today’s extremely competitive NYC real estate market requires developers to be even more mindful of their real estate projects if they want to come through unscathed. That was just one of the takeaway ideas from Anna Zarro of Town Real Estate at BisNow’s 5th annual NYC Construction & Development Summit on December 4, 2014, at the Roosevelt Hotel.
Maury Golbert, CPA, J.D., LL.M., Tax Partner and chair of Berdon’s Real Estate Services Group, moderated a panel of experts who shared ideas about the redevelopment / repositioning of existing buildings. The explosive growth in repositioning commercial structures in NYC is being driven by several factors, including:
Joining Golbert on the panel were:
In addition to a thorough due diligence process, panelists agreed that a clearly defined vision for what the building is to become and how it is to be repositioned is required. What is the nature of the tenants this building could attract and where do they want to be? Employers recognize that their employees want to work where they live. That, plus sky high Manhattan property values, has caused developers to seek opportunities in the outer boroughs. Wherever the development takes place, it becomes the developer’s challenge to decide who will want that space and why.
Repositioning a building often entails relocating core components and reconfiguring the floor plan. In today’s market, developers strive to use as much of the space as possible, including rooftops. Bassen said developers need to be creative when it comes to the usage and placement of windows and adding the right mix of restaurants and recreational facilities. For example, one commercial property was being turned into loft spaces to attract tech companies. Panelists agreed that a firm grasp of demographic trends, the market cycle, and the prevailing culture is needed.
Golbert mentioned the tremendous infusion of offshore capital in the NY marketplace, noting some 40 joint venture projects currently underway. Investment by foreigners can be narrow and complicated, though, requiring more time to get funding in place. Golbert also noted that owners and developers need to have an understanding of the tax implications of large repositioning projects to be sure that they are maximizing tax benefits available, especially in light of the new tangible cap regulations.
It is an exciting, but challenging environment for developers, Meringoff said, noting that developers must keep in mind the possibility of a market correction, which some panelists felt is inevitable.