NEW YORK CITY—With the benefit of hindsight, a group of industry executives recently discussed some of the highlights—and low lights—of 2014 and they looked ahead to next year during a NAIOP meeting.
“This has been a challenging year in the acquisition environment,” said Todd Bassen, senior director-acquisitions, Invesco. I've pushed back this year with pricing where it is so we haven't been as active this year but that's probably going to change.”
Agreed Rob Schiffer, managing director, SL Green, “Our year was tough too, pricing practically was impossible. Everything we bought was off market, very transitional, opportunistic buys. Structured finance has been tough for us too. We've manufactured yield by investing in land and other assets that are non traditional for us.”
Leasing this year was a different story, noted Steve Winter, VP of commercial leasing at Related. “The commercial leasing market has been healthy, particularly in Midtown South where there's a scarcity of big blocks. We're going to see more $100-per-square-foot deals this year than we have in the last five years.”
Schiffer is bullish on rents too. “We believe you'll see a significant rent spike in the next few years at the higher end, which is why we acquired the Gem Tower.
Of course, location plays a role in performance. Said Bassen, “There certainly needs to be an investment in East Midtown. It has the greatest possibility of suffering from the subsidies Downtown and those being provided to Hudson yards. We're hopeful that the task force put together by the administration to study this will result in rezoning that'll lead to investment.”
And a transportation shift that lies ahead could give East Midtown a boost, he noted. “We haven't seen yet the effect of the Long Island Railroad coming into Grand Central Terminal that could be game changing. Will executives from Long Island coming to Grand Central now rethink their office needs and move to Grand Central?”
Its forward thinking along those lines that has executives primed for 2015.
“We will see many billion dollar transactions this year,” predicted Steve Stern, global head of real estate at Morgan Stanley. “Sovereign wealth funds and foreign investors have become more sophisticated and are coming in for long-term holds.”
“It's shaping up to be an exciting year,” added Schiffer. “We're expecting a 10% or so spike in office rents and a tightening of concession packages.”
The outlook on both the condominium and retail fronts is rosy too, noted Winter. “We haven't really launched condos at the Time Warner Center but at Hudson Yards there's a lot of pent up demand. And there's a huge pipeline of retail deals, our team is working to sign a lot of retail tenants in the wake of Neiman Marcus announcing it was coming to Manhattan. We think the first quarter should be very positive.”
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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.
