RDM’s Blake Grosch and Joe Leach were in attendance at this year’s Massey Knakal Commercial Real Estate Summit. Now in its 4th year, the event brought over 500 commercial owners, investors, developers and other real estate professionals together for a full day event focused on New York’s office and retail markets.
This year’s keynote was delivered by Silverstein Properties’ Chairman, Larry Silverstein, who spoke about his early beginnings, today’s market trends, the future of New York City and the World Trade Center.
Starting out/ Fundamentals
• Started out with nothing and worked with his father to buy first building in NYC.
• After reaching out to a number of potential investors, they were able to convince enough people to give them money to do their first deal.
• A few deals later, the big banks who initially turned them down were interested in investing with them.
• Larry believes education is enormously beneficial.
• In his youth, he received his Juris Doctorate even though he knew he'd never be a lawyer.
• Recommends getting a law degree or business degree or both.
• Feels the reason Silverstein is voted one of the best places to work in NYC by Crains is due to its strong collegial feel.
• They have focused a great deal on internal growth and promoting from within.
• Silverstein makes sure employees have a good quality of life, which benefits both the individual and the company.
New York City
• Said New Yorkers have a high level of work ethic; believes we're blessed.
• The US is the most stable market in the world and New York City is its hottest market.
• This makes buying difficult because there’s a sea of investment capital looking for product.
• As a result returns have been driven down.
• Feels best opportunity today is to acquire land in NYC.
• Mentioned that over $300 per SF to develop office space downtown will be tough to generate a return.
• The new administration needs to work with developers to adjust the excessive real estate tax burden on office development.
• This is very important in order to keep business in the city and stimulate further development.
• Believes long term investment in NYC is hard to beat because the market is stable.
• It’s hard to retrofit old buildings to new technology standards.
• A popular trend is to convert old office stock to residential because residential doesn’t require the same technology standards as office buildings.
World Trade Center
• Larry said he thought development would have moved quicker.
• It was complicated because they had to deal with the administrations of both NY and NJ as well as the Port Authority.
• Said things will be done by 2018.
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RDM was in attendance at Bisnow's 5th Annual NY State of the Market event. The event, which RDM was a sponsored, brought together the top real estate figures of New York, as well as top national figures, who spoke about the current state of the market and key trends.
The panel included professionals from Avison Young,
Massey Knakal,
Himmel + Meringoff Properties,
Colliers International,
Cushman & Wakefield and MHP.
These are some of the nuggets of information shared:
- Bruce Mosler (Cushman): NYC is a story of sub markets - the financial sector is still on the sideline, while Midtown is improving. Owners need to make capital improvements in order to stay relevant to changing tenants demands such as column free floor plates, natural light and connectivity.
- Arthur Mirante (Avison): Has a cautious view of the NYC real estate market but on a global level believes there is a need to celebrate. The fundamentals in NYC are the best in the world even though the financial service sector has been stagnant.
- (AM): NYC is hot & popular today - it's perceived as safe, which is benefiting real estate big time. People want to study, live, and work here where not so long go people were fleeing.
- Office space in NYC is not being built on spec - this isn't common in other markets.
- Tech, Advertisement, Media, & Information Sectors (TAMI) are driving NYC's office market -- these sectors are comprised of a younger generation who want to be in NYC.
- (BM): Sees a rent spike on Avenue of the Americas by the end of the year, this portion of office block was greatly affected by the downturn.
- (AM): Sees rents going up by 20 to 40% over the next couple years, depending upon the sub market, and thinks we can support another 20m SF of office space.
- Risks to the NYC office market include the mayoral election, rising interest rates, national government, etc. However office market fundamentals have never been better.
- Most important thing landlords need to do to lease space is modernize their buildings - tenants want to attract and retain their talent.
- Leslie Himmel (Himmel) sees interests rising along with cap rates, Robert Lapidus (L&L) doesn't see cap rates rising because there's too much money out there looking to buy in NYC. Investors want inflation protection and NYC is still a top market for this.
- From a CRE view safe streets should be the biggest priority for the next mayor.
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RDM was in attendance at this week’s 4th Annual CRE Investment Summit hosted by Massey Knakal. The annual event provides workshops and panels on the acquisition, disposition, financing and development of Commercial Real Estate properties in the NY Tri-State area.
In the Keynote discussion, Leslie Himmel and Stephen Meringoff of Himmel + Meringoff Properties shared their success in the office market, discussed leasing development and the future of the market.
In the Past:
• The 1990s were tough times to maintain portfolios but it helped make investors stronger.
• Since 2005, building sales have been on a “roller coaster ride”, the bottom being 2007.
• In the past, building information was much harder to obtain but technology has made information more transparent.
The Current State:
• Robert Knakal (Chairman, Massey Knakal) predicts building sales will be down this year in NYC compared to last year.
• There were more buildings sold in Q4 in 2012 than any other period in NYC due to a foreseeable increase in capital gain taxes.
• Tax policy affects behavior with investment sales
• Building values will increase this year due to supply and demand
• Important factors that will influence the market in 2013: supply, demand, interest rates, jobs and the NYC mayoral race.
• Stephen Meringoff (Co-Managing Partner, Himmel + Meringoff) says “There really aren’t any bad markets in NYC”, however, “without leverage, real estate is a mediocre asset class”.
Borrowers Brawl
In the Borrowers Brawl, senior executives discussed the inherent conflicts and mutual interests between CRE borrowers and lenders.
• Low interest rates have afforded building owners to carry loans through tough times.
• There are restructuring options available for borrowers that can help mitigate risk.
• Borrowers that aren’t solving their problems could be because lenders won’t listen or assets aren’t performing.
Technology in Real Estate
Panel discussions also weighed in on how technology is affecting the industry. As more tech and media companies move into New York, they seek spaces which offer more open space, less space per employee and higher reliance on technology within their spaces – which affects how new offices are designed and maintained.
You can find out more about the annual CRE Investment Summit on Massey Knakel's website.
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