NYC as the “Idea Center Of The World” And How Tech Companies Are Changing New York Real estate Market
This past week I attended the YJP Real Estate Summit in Chelsea. A distinguished board of panelists was present which included Lawrence Benenson, Winston Fisher from Fisher Brothers, Leslie Himmel, Bruce Mosler (Cushman & Wakefield) and Stephen Siegel with CBRE. Jim Wacht (Lee & Associates) was the moderator and did a fantastic job, making jokes left and right and making it a lot of fun for everyone. Norman Bobrow was honored with the Deal Maker and Leadership award and gave a very inspirational acceptance speech.
The discussion was focused on market developments and future forecasts, city safety and continued strong (and still growing) presence of foreign buyers not only in Manhattan but in the U.S. as a whole.
I was quite impressed by all the comments and observations that were made by the panelists, however I will dare to say that it was Winston Fisher and Stephen Siegel’s points that left the deepest impression on me. Here are some key ideas from last night’s discussion.
“Cities are the “centers of gravity” that drive real estate growth and demand – or are they? “
That comment made by Stephen Siegel was about NYC continued growth, which he sees proceeding into the foreseeable future. Demand for office space continues to grow and is fueled by companies who feel they want to be close to the center of the action. He sees the city itself as a center of gravity that will continue drawing talent and more people, especially young professionals who want to be where they can connect with like-minded individuals and pioneering companies.
I can agree with him when it comes to companies, however on the residential front it seems things might be different. Recent article by The Wall Street Journal published on January 21 this year, talks about more and more people saying that the dream of owning a suburban home is not lost on them. According to the article, new data indicates that more than 60% of millennials actually want to live in the suburbs. I think that rising property prices in Manhattan are certainly part of this equation. It seems like the whole idea of increased urbanization is being tested anew by the new data coming in. We will simply have to wait and see what happens.
NYC as the “idea center of the world”
I found this to be an especially brilliant concept put forth by Winston Fisher (he made many other spot-on observations as well). New York has steadily become the number 2 tech and innovation center in the U.S. Tons of money and talent continue flowing in. Winston – and I completely agree with him – gave a lot of kudos to Mayor Bloomberg whose contributions to the tech scene in NYC was unbelievable. Cornell and Technion Tech Campus currently being built on Roosevelt Island will be another major milestone for New York, which in addition to being the financial center of the world is slowly but surely becoming the global center of knowledge, technology and ideation. Which means more money, more companies and more people. This also means good news for the real estate market.
TAMI companies and their impact on the real estate market
I found it completely fascinating that 50% (if not more) of last night’s discussion was focused on technology companies. It might have been Bruce Mosler who said that based on his data, TAMI companies (Technology, Advertising, Media and Internet) now account for approximately 30% of demand for commercial office space. That’s an incredible number.
- Disrupting the way commercial real estate owners and brokers operate – was not a point of discussion last night but in his recent post on the topic, Josh Guttman (http://goo.gl/IZqz7I) said that he sees the world of commercial real estate – with New York being its world capital – as prime for disruption. It is happening, will continue to happen and will be driven not only by the companies who focus on this market segment but by the actual real estate clients, i.e. Google, Facebook, etc. When you are used to doing business in a certain way, you want to see new methodologies employed across the board. How will NYC real estate handle such a change?
- Demand for more LEED/ Green space – all the panelists last night agreed on the importance of investing money in the buildings and changing their layout. TAMI companies demand open space layout, once again because it is part of their day-to-day creative and work process. But adding more open space is not enough. The overall quality of the space is super important. Upgrading space to meet LEED/Green criteria is important. It positively affects people, in terms of overall wellness and their productivity at work. But – as Winston Fisher eloquently put last night – this demand will have to reconciled with economic realities and has to make financial sense for all parties involved. Tech companies tend to like Midtown South area but buildings in Midtown and in the financial district can offer additional benefits, such as higher floors, thus more exposure to light and other benefits. We will have to wait and see how this is going to pan out, but decision makers in the tech world should definitely keep this in mind when choosing their locations.
So another great event for YJP, great insights by the panelists. The future of the real estate market in New York has never looked brighter.