Reading a Hard Market: Insights from James Nelson of Massey Knakal

September 18, 2014

James Nelson, partner at Massey Knakal Realty Services, knows a thing or two about the New York real estate market. He’s been involved in the sale of over 300 properties valuing over $2.5 billion, and has a wide breadth of knowledge when it comes to successful investment approaches. We asked James to share some of his insights on current market trends with us.

Waning Interest in Traditional Investments

In 2014, New York City saw the highest sales volume and pricing levels since 2007. According to Mr. Nelson, that sales activity can be directly attributed to low interest rates and the ever-increasing demand from the international community.  This year, we are seeing limited core opportunities (new construction, multi-family, office) in New York City and most developments are primarily focused on condo development. There also haven’t been any new trades of newly constructed apartment buildings in Manhattan, compared to last year when both The Olivia and New Gotham apartments sold for $386 million and $170 million, respectively.

Real Estate Trends Setting the Stage

Retail has had massive cap rate compression citywide, but there may not be any further compression unless rates drop or rents climb to even more unprecedented levels. Buyers are not willing to take on negative leverage like they did back in 2006 and 2007, and understand they need to put in more equity to secure new deals.

The outer boroughs of New York are gaining traction and institutional capitalization is rising in these markets. With the recent purchase of the Watchtower building in Brooklyn, institutional buyers have opened the floodgates and commercial space in Brooklyn is now more expensive than Downtown Manhattan.  Mr. Nelson believes Queens will be next!

James Nelson is a panelist at the upcoming Real Estate Private Equity Summit on October 1, where he will be sharing more insights on value-added strategies and market trends.

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