Thirteen – and counting on renewed good luck

Happy 2013.  It promises to be a lucky year for the New York City real estate industry.

With the threatened 2012 Armageddon safety behind us, the metro area market is reawakening in a quadruplet of sectors - commercial sales, commercial leases, residential sales, and residential rentals.

Credit the pent-up demand; the growing housing shortage; a small – but appreciable – rise in employment; and some exciting new local projects. Whatever the reasons, there’s an altogether new buzz noted in a spate of recent publications.

To get specific:

·        Commercial sales are so solid that a recent study by Pricewaterhouse Cooper US and the Urban Land Institute report ranked New York City as the second most exciting real estate market in the country for this year (after San Francisco). The combined lure of the city’s technology hub, two new subway lines, and many desirable neighborhoods are sparking interest – and spurring development in both the city and the boroughs. 

·        Commercial leases benefit from the same factors, with the PWC and ULI study predicting that NYC and the country will enjoy “noticeably better prospects as compared with last year.”

In a dramatic example, just days ago 11 Madison Ave., which had been   offered for $1.5 billion, was taken off the market by developers who realized that had more to gain by maintaining their lease with Credit Suisse than by selling the structure. As described in the current issue of Crains, the deal show just how valuable prime commercial space has become.  

·        Residential sales are on the upswing, according to Forbes magazine.  The reluctant buyers and sellers of recent years are re-emerging, to find mortgages that remain at historically low interest rates. Yes, financing is still tougher to get than before the bust, but banks are loosening up.

Meanwhile, the pent-up demand for housing is spurring new construction, certain to create a bounty of new jobs – further enhancing the economy.

In this transitional real estate marketplace, cash deals fare the best. But these shoppers, many of them foreign buyers lured by the relative stability of US investments, will further ignite the market. Meanwhile, areas impacted by Sandy now offer uncommon value to buyers brave enough to venture downtown.

·        Residential rentals may well be the pot of gold at the end of this rainbow. As Manhattan rents, fueled by the many New York City residents still avoiding property ownership, may well increase by five to 10 per cent. That’s high enough to convince many condo and coop developers to convert back to rentals. Hot neighborhoods from Greenpoint in Brooklyn to downtown Manhattan will benefit from the new crop of apartments.

Every silver lining has a dark cloud.

This one has to do with those rapidly rising rents, which are threatening the affordability of literally all of Manhattan and many of the boroughs.

But the flipside is that owning rental property is more attractive than it’s ever been.  Starter apartment are in such short supply that they’re snapped up quickly, making this perhaps the most auspicious time ever to acquire a multifamily or mixed-use building. What could be better than combining home ownership with a healthy investment return.

Thirteen never looked so good!