Long Island Commercial Real Estate Outlook

EisnerAmper co-sponsored “Commercial Real Estate Outlook: 2015 and Beyond” with Bloomberg on December 11, 2014. Our partner, Ken Weissenberg, moderated the event along with Michael Kosnitzky, Partner at Boies, Schiller & Flexner LLP. Their distinguished panelists included:

• Brian Harris, CEO of Ladder Capital
• Scott Rechler, CEO of RXR Realty LLC and Vice-Chair of the Board of Port Authority of NY/NJ
• Joseph Sitt, CEO of Thor Equities
• Peter Sotoloff, CIO of Mack Real Estate Credit Strategies
• Steven Witkoff, CEO of The Witkoff Group LLC

Taking the continually evolving and highly competitive real estate market as a given, there was a consensus that after the economic recession, successful real estate investment depended a lot on riding the wave of appreciating real estate prices.

Mr. Rechler shared that when developing properties now there is a concept of “manufacturing creativity” in buildings for both residential and commercial tenants. He explained further that commercial tenants in some industry sectors are looking for perks such as doggie day care or bicycle repair shops.

Of relevance to our market on Long Island, he noted there is a trend away from the traditional white picket fence suburbia lifestyle toward more urban areas. Even in suburban neighborhoods, people want to live closer to entertainment and public transportation.

Looking out more broadly, Mr. Sitt said that over the last two months the economy has been similar to a deck of cards that has been reshuffled and redealt. The price per square foot is the highest it has ever been in saturated markets like New York City, San Francisco and Chicago. The U.S. dollar is strengthening and the technology industry is booming. However, trouble looms in some markets due to global factors such as the drop in energy prices and the struggling Russian economy, as well as the challenges faced by the emerging markets in Africa and the Middle East where disease and terrorism have heightened risk to extraordinarily high levels.

In regards to the financing of real estate projects, Mr. Harris and Mr. Sotoloff both commented that increased regulatory oversight post-recession has blocked financing for certain parties. Financing is available if you fit a certain model. However, there are pockets of underserved developers and investors who must access alternative forms of financing due to various regulatory issues.

Market trends such as manufacturing creativity and available financing have been apparent in the Long Island real estate market. The flow of young professionals to more urban areas has created a need for creativity here to attract them back. Examples do exist: Transit-oriented real estate projects like Glen Cove Piazza have been appearing near Long Island Rail Road stations, offering mixed-use development including housing for young professionals. Vision Long Island recognized the project with its Creating Sense of Place Award for helping to attract and keep young professionals in the region, and for promoting a vibrant, sustainable, and walkable community. Another example is the Village of Huntington, which has thrived as people have found a place to live, work and play. Our neighborhoods need more projects like these that will allow economic growth and development to continue into the future. Young professionals are the future of our economy and we need to support their needs in our communities.