Recently surveyed commercial real estate executives believe their fellow investors are overly bullish on the local market. In other words, they assert in new research by Marks Paneth, commercial properties in NYC are “overvalued.” GlobeSt.com caught up with William Jennings, partner-in-charge of real estate at the accounting firm, to discuss the mindset of survey respondents.

GlobeSt.com: Why has the number of executives who think properties in NY are “moderately overvalued” gone up so much since June of last year?

I would have to assume that it is cautious optimism. All you have to do is look at the rising stock market and prices of New York real estate during that period.

GlobeSt.com: Since the low interest rates are impacting the entire nation, do you have any thoughts on why survey respondents think NY, in particular, is being adversely affected by this trend?

It is probably because of the “background fear” that real estate is overvalued along with the perceived negative impact a rate increase will have on New York because it has a longer way to fall.

GlobeSt.com: In announcing the report, you said it sounds like survey respondents feel that commercial real estate in NYC is overpriced yet a sound investment. Isn't that a contradiction?

Again, I believe it is cautious optimism. Most think prices are too high but they certainly do not want to be out of the game. Investors are still buying and cap rates are very low (resulting in a higher price). Foreign money is flowing in; there is a lot of money parked out there and investors want to put it into real estate.  For example, think of a stock that you believe is incredibly overpriced.

Nobody wants to get off the train so they keep buying it. New York City real estate is riding the same trend. It's fear of not being in the game.

GlobeSt.com: Do you have any thoughts on why survey respondents said Brooklyn is less risky than Manhattan?

The prices. Brooklyn is not perceived to be as overpriced as Manhattan. Therefore, there is less price risk.