By: Frank Futia
On January 29th, hundreds of ULI members and nonmembers gathered at the New York Times Building to attend ULI New York’s Real Estate Outlook 2019. The annual event kicked off with a presentation by Mitch Rochelle of Price Waterhouse Coopers, who shared the findings of Emerging Trends in Real Estate ® 2019, one of the industry’s most highly regarded and widely read trends reports.
Following Rochelle’s presentation, industry veterans Melissa Román Burch, Executive General Manager of Lend Lease Americas, Hilary Spann, Managing Director, Head of Americas Real Estate Investments for the Canada Pension Plan Investment Board and Rachel Loeb, Chief Operating Officer of the NYC Economic Development Corporation gave their take on the outlook for 2019.
“Good not great” said Melissa Burch, of her overall opinion of the market. This year’s sentiment poll signaled a virtually identical overall outlook on the market as 2018. Burch’s cautious optimism for 2019 hit on her excitement about the diversification of New York’s job market following a wave of significant new tech commitments to the city from Google and Amazon. Burch cautions however that while the stock market recouped its end of the year losses in 2018, the market is increasingly volatile and will require continued diversification for New York’s market to thrive.
Hillary Span echoed Burch’s sentiment while providing a cross-market perspective. Span’s outlook on tenant risk is “divergent across markets” especially in regards to tech which Span is more cautious about along the East Coast than on the West Coast. Regardless Span sees tech growth outpacing inflation in 2019 which will benefit office landlords as tech growth continues to take a larger share of the office market.
Coming off the heels of Amazon and Google’s recent expansion announcements, Rachel Loeb echoed the panels confidence in New York’s growing tech community. Loeb pointed out New York’s unparalleled access to talent across education levels as a key draw for tech companies to the area. Loeb also pointed to the growing city-wide trend of the diversification of where companies are located. No longer just taking space in Manhattan’s traditional business centers, tech and creative companies are locating in different parts of the city, like Hudson Square, Industry City, Downtown Brooklyn and Long Island City, which is creating value and opportunity for the local real estate community.
Interest rates were a topic of conversation the panel also agreed upon, with the consensus that rates would stay the same for 2019. Coming from the Canadian Pension Plan investment perspective, Span noted the opportunities that would be created especially for unlevered investors if interest rates were to climb in the future. Span also sees the US poised to continue to attract global investment with the US providing attractive yields particularly on a risk adjusted basis, amid growing economic volatility in certain global markets.
Affordability was another concern for the panel. Burch touched on the affordability crisis the growth of gateway cities are experiencing with rising residential costs and a disparity between housing product. Burch signaled concern over rising construction costs, pointing to the need for technology improvements in the construction industry that would allow for a more manufacturing approach to new housing.