NEW YORK CITY—As the end of the year approached—and prior to the acquisition of Massey Knakal Realty Services by Cushman & Wakefield—Bob Knakal, chairman and a co-founder of the firm, opined on the state of the investment sales market over the past year and where it's headed during a recent gathering of the New York State Society of Certified Public Accountants.
“This is the best commercial real estate market I've ever seen because more stuff is selling then ever before,” he said. “The market is on pace for an all-time record. We're at 5,100 properties traded for the year and we think it'll be 5,200 or even 5,300 by year-end.”
Further, Knakal asserted, “I've never seen more first time buyers in my 30 year career than I'm seeing now. In the last three years, we have sold to investors from 51 different countries and most of them aren't real estate people, they own a car dealership in China or a spice export/import operation in India and they have some money so they want to buy property here.”
Prices are inflated, he conceded, but there's no sign of that changing too soon. “Values are completely off the charts. Today, the value is higher in every property type and in every submarket than it was during the previous peak. Last year we eclipsed $1000 per square foot for the first time and this year we're over $1300 with an average of $1,600. But the upside of the market is strong so we expect it to be like this for the next year or two.”
Still, there are challenges ahead in the market, Knakal acknowledged. “Interest rates are at historic lows but values have tripled so that big gap tells you that a correction is in order. And locally, the question is what's going to happen with real estate tax policy; tax reform is the biggest risk to commercial real estate. If the 1031 Exchange is modified in any way and tax rates go up, I'd advise you to go on vacation for a year because no one is going to sell.”
Of course, in this market, there is always buyer demand, he noted. “In New York, we could have the most dilapidated piece of crap with environmental problems and hair growing out of it, there'd still be 100 buyers lining up for it.”
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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.
