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EisnerAmper Blog

Building Success: An EisnerAmper Real Estate Blog

NYC Real Estate Market Experiencing Rapid Growth as Residential and Commercial Trends Shift

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October 23, 2014 

By Michael Benison, CPA, MST



At the recent EisnerAmper Real Estate Private Equity Summit a panel entitled “This One or the Other: Valued-Added Opportunities in New York vs. Traditional Core Investments” explored the value-added fund market. EisnerAmper’s Aaron Kaiser moderated the group, which included Luke Anderson of Franklin Templeton Investments, Thomas Bermingham of USAA Real Estate, Nicholas Bienstock of Savanna, Robert Deckey of George Comfort & Sons, James Nelson of Massey Knakal, and Jameson Weber of Hightower.

The group was in agreement that the New York City real estate market is rapidly growing. This year will have record sales in NYC, surpassing the 2007 levels. The floodgates have opened and capital investments have been pouring into Manhattan, Brooklyn, and Long Island City.  Foreign investors are flowing into New York City. There is a global presence and worldwide communication can lead to massive capital inflow and numerous bids in the marketplace.

Further talking points include:  New York City is ranked #3 as the best place to work and #7 for luxury apartments. People want to live and stay in the city.  Suburban markets are not growing as rapidly; current trends indicate people want to experience the city atmosphere. Commuting patterns are starting to shift as more people are coming in from the boroughs instead of the suburbs. There are fewer rental apartments available now compared to the 2006 market. There is a surplus of luxury apartments available. The focus is on attracting top talent from younger generations to come to New York. The booming technology market is attracting an influx from the West Coast. 

Technology is also a driving factor in the price increases in Manhattan.  Retail values are skyrocketing as the price of square footage dramatically increases. Brooklyn is growing rapidly with square footage well below replacement cost.  Tenants such as Revlon, Mastercard, IBM, Google, and Twitter are moving from Midtown to Downtown, Chelsea, Soho, and the Financial District. Since 2001, roughly $30 billion has been invested in the Financial District.

The Tale of Two Cities – Sam Zell Keynotes Second Annual EisnerAmper Real Estate Private Equity Summit

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By Isaac Mansoura, CPA and Dmitriy Gelfand, CPA

Gelfand, DmitriyMansoura_IsaacThe Second Annual EisnerAmper Real Estate Private Equity Summit   on October 1 featured investing legend Sam Zell as the keynote speaker. In an interview focusing on topics that crossed the globe and spanned decades, Zell provided great insight and commentary on the state of the real estate industry.

He offered his own version of the Tale of Two Cities, in that New York and San Francisco have and continue to show tremendous growth in real estate, while the rest of the country remains in equilibrium at the moment.

Zell lamented the fact that, in his view, there has been no significant new office construction in New York City other than the World Trade Center. He further shared that leases are being renewed for less space, not just in New York City, but countrywide, affecting commercial real estate in every market.

He disagrees with the popular notion that foreign investment represents a significant factor in the growth of New York City real estate pricing. Zell also expressed that the availability of local capital is abundant.

NYC Top Market for Global Investors

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October 16, 2014

 

By Deborah Friedland

Friedland, DeborahThe sale of the Waldorf Astoria to a Chinese Investor is another indication that New York City is a top investment market for global investors.
 
Gateway cities remain attractive buying opportunities for foreign investors looking for a safe haven to invest. If the geopolitical climate continues to remain unstable, I would expect to see this trend continuing. Specifically as it relates to the Chinese investor, the growing Chinese economy combined with a greater access to credit should continue to support increased investment in gateway cities across the U.S. (including Los Angeles, San Francisco, Chicago) and worldwide. The increase in wealth in the global community including Russia, China, and the Middle East and the desire to invest in “safe” investments will continue to support trophy asset purchases throughout the U.S.
 
With respect to the hospitality sector, the sale of the Waldorf for approximately $1.4 million per key creates a benchmark for the industry, slightly below the purchase of the Setai Fifth Avenue for $1.5 million per key. The Waldorf will reportedly undergo a significant renovation so the all-in cost per key of the Waldorf might very well be the highest price paid per room.
 
Starwood Capital Group is rumored to be in the market to sell the hotel portion of the newly developed Baccarat Hotel & Residences for $2 million a key. Perhaps not such a stretch after all given that Hyatt Hotels Corporation paid $390 million for a 100% stake in the Park Hyatt Hotel component of Extell Development’s One57 tower project, equating to approximately $1.8 million a key.
 
I expect to see continued interest from foreign investors in the hotel sector as what once was considered an 'alternative' real estate sector is being accepted as more mainstream, since it offers attractive returns and increasing security for the investor.

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