NEW YORK CITY-Real estate brokers are in a glass-is-half-empty kind of place. The community had a dip in confidence in the current real estate market in the third quarter of 2013, compared to the previous quarter, because of concerns about residential inventory and political uncertainty. The city's brokers also lowered expectations for their six-month outlook, even though they reported strong confidence in present financing conditions, according to the Real Estate Board of New York's Real Estate Broker Confidence Index.
The Overall Broker Confidence Index decreased to 8.75 in the third quarter from 8.89 last quarter. “There's a growing concern that there haven't been enough condo units built and, as a result, there isn't a lot of choice for prospective buyers,” REBNY SVP Michael Slattery tells GlobeSt.com.
“Brokers are frustrated, new product tends to raise the value of properties in the facility of the project and that may help to shake out the adjacent properties,” he says. “We've been hearing it a lot from the brokers, yet a record number of sales closed in the third quarter. I think what's happening is that these units are being gobbled up so quickly that they don't even hit the market, so the sales don't alleviate the stress for brokers. Nothing they see is available or suitable, and they're waiting for something else to appear but it never shows up.”
As for the government issue, Slattery says, “The end of the shutdown was a temporary fix, and there wasn't a lot of conversation about a long-term solution. If you're looking six months out, it's hard to be optimistic.”
“New York City remains one of the most prosperous and dynamic real estate markets in the world. We're seeing strong and steady demand for both residential and commercial properties, while financing for deals continues to improve from the downturn,” adds Steven Spinola, REBNY president. “That being said, there are political headwinds like another government standstill that could disrupt market confidence especially if it triggers a sudden and rapid rise in short-term interest rates.”
The Residential Overall Confidence Index decreased to 8.33 in the third quarter from 8.71 the previous quarter. Despite inventory concerns, residential brokers were hopeful that more developments and the resumption of projects stalled during the recession will come out of the pipeline catering to a wider spectrum of income earners and elevate the economy.
“Unfortunately, it seems that future confidence in the real estate market is being eroded by political uncertainty in Washington,” says Eric Anton, a managing partner at Brookfield Financial and a survey respondent. “Most people think that in a few months there could be another showdown over spending and the debt ceiling.”
The Overall Present Situation Index within the Commercial market actually showed an increase in confidence, recording 9.77 in the third quarter, up from 9.28 last quarter. Brokers remained positive about the current financing market and commercial real estate leasing market, despite a slowing down of activity in the retail sector.
“The NYC investment sales market is at unprecedented levels. The average price per square foot in Manhattan is approaching $1,000, which is 50% higher than 2010 levels,” says James Nelson, a partner at Massey Knakal Realty Services and a survey respondent. “We believe this is a direct correlation to the lack of supply that is not meeting global demand.”
However, adds Slattery, “The sales market is the source of strength and optimism, and there's some confidence in the ability to finance deals. Retail is also doing well, but office leasing seems to be a bit slow. A lot of new product is coming on the market that isn't being taken up as quickly as brokers would like, with more being anticipated.”
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Rayna Katz
Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.
