Each year, ULI New York brings together senior industry leaders to present the Emerging Trends in Real Estate ® report and to forecast the year ahead. This year’s forum took place at The TimesCenter on January 27. Mitch Roschelle, US Real Estate Advisory Practice Leader at PwC, astutely relayed the highlights of this years Emerging Trends in Real Estate® report as they relate the New York City and its surrounding markets.
A shift in home ownership rates, adapting office trends, changes to capital regulation and suburban vs urban movements were among some of the trends discussed in the presentation. Following Roschelle’s presentation, Jeff Blau, CEO, Related Companies, Leslie Wohlman Himmel, Co-Managing Partner, Himmel + Meringoff Properties, and Darcy Stacom, Vice Chairman, Investment Properties, CBRE reacted to some of the trends.
The discussion began noting the results of an instant survey question posited to the audience. The question asked, “what is the biggest issue that could influence the real estate market: oil prices, the election, China, or the stock market?” The winner? China.
Having recently been to China, Blau commented, “If you talk to Chinese investors, they don’t see any problems with the economy and they basically think everything is fine.” He continues, “but if you ask the State Administration of Foreign Exchange, which is basically the equivalent of the Federal Reserve, they’re thinking about limiting currency controls and outbound capital flows to address some of the current concerns. I think it’s a hint of what’s about to come.” Darcy Stacom, on the other hand, didn’t seem so concerned, citing Middle Eastern, Canadian and pension fund interest in the U.S. market.
As a specialist in repositioning of B class assets, Wohlman Himmel was able to speak to the desire for “cool” space. As owners and purchasers of older building stock, Himmel + Meringoff has been able to capitalize on renovation and repositioning of these properties. Wohlman Himmel spoke to the growth of smaller “startup” companies in the 1 to 49 employee range; which saw 46.5% of job growth in the last two years. Providing an affordable option for this size of organization, many of which are graduating from co-working spaces, has proven a strategic market segment. The panelists collectively agreed that tax incentives are needed not just for the development of ground-up construction, but also to stimulate the redevelopment and repositioning of aging assets, of which Midtown has plenty.
Jeff Blau shifted the conversation, speaking to the marketing of top tier office space. He noted that being a part of the talent attraction and retention solution is critical for new office developments. Many organizations, including those moving to Hudson Yards, are looking to situate their offices where their talent is or wants to be.
On the residential side, the redefinition of a suburb, the 18-hour city and housing ownership rates were all points detailed in the Emerging Trends presentation. The high cost of housing in cities is pushing Millennials into the suburbs against their will. In the New York context, regions seeing growth will include densification within walkable distances from major commuter points in areas including the outer boroughs, Jersey City, Westchester County, Fairfield County, and Long Island.
Affordable housing is always a topic of discussion in New York City. The panelists agreed that the changes to, and/or lack of commitment for development incentive programs of late is likely to contribute to a slow down in the development of affordable housing product. Without further incentives many believe it will be hard for the city to reach its affordable housing targets.
Finally, the panelists outlined the following key points when asked what the main issues facing New York’s real estate market would be for 2016.
- Availability and access to quality education, and in particular primary education
- The condition of infrastructure as well as the funding mechanisms to address such shortfalls
- Resilient infrastructure and buildings, and the changing regulations
- Aging building stock
- Cyber security
All topics which we are sure you will be hearing plenty more about in 2016.