Given how well New York City’s economy has fared over the last two years in spite of the fact that Wall Street still does not seem able to shake off its hangover from the financial crisis, it should be easy to look into the crystal ball and forecast what will happen in 2013. But this is New York City and unpredictability seems to be the rule. The unexpected Superstorm Sandy is just the latest.
That said, we maintain an optimistic outlook for the year. To put the future in perspective, let’s recap the highlights of 2012. First, New York City added close to 75,000 jobs in 2012 through November. While December’s data could show a decline, the level of jobs in New York City is 70,000 jobs above the peak employment in 2008. More importantly, nearly every industry is adding jobs. Wall Street employment has been flat, but even this is surprising given all of the notices of layoffs in the industry. The tourism numbers keep going up: more than 52 million visitors came to New York City in 2012. These travelers have kept hoteliers, restaurants, retailers, Broadway producers and others very busy. Finally, commercial property sales ended the year on a banner note as nearly $12 billion in sales closed in Manhattan in the fourth quarter, the highest since 2007 when the second quarter neared $20 billion.
The heavy activity in the fourth quarter was due to investors’ motivation to close deals before the capital gains tax went up. This flurry of activity the last few weeks will likely take away significant volume in 2013, but investors are still eager to invest in New York City.
Why? First, it’s clear that owners prefer owning well-located bricks to owning paper. The stock market does not offer the cashflow that real estate does, and the uncertainty in the economy has created significant volatility in the Dow Jones over the last few years. Also, investors want to get capital into the real estate market and start projects in a low interest rate environment. That said, the most active sector for investors seeking “high-powered yields” will be condominium development, particularly in the outer boroughs — a shift from the post-Lehman years, when investors rushed to buy up multi-family properties and trophy office assets. In Brooklyn, for example, the area around the new Barclay’s Center is buzzing with opportunity.
This means that investors and brokers have to do more homework, but the payoff could be huge given the growth in development in the boroughs. Even after Sandy, Brooklyn remains a sought-after market, and the desirability of its myriad neighborhoods keeps steadily expanding.
Peter Hauspurg is the Chairman and CEO of Eastern Consolidated, the nation’s largest single- office real estate commercial property sales firm in the U.S. with several billion in annual sales, primarily in the New York metropolitan and Tri-State area. Mr. Hauspurg and his partner, President Daun Paris, founded the firm in 1981 and have been creating some of the most significant deals to dot the New York City skyline ever since.