ULI New York Real Estate Outlook 2020

January 28, 2020

By: Michael Torhan, CPA

“If you build it, they will come stay.”

Historically, a common notion in real estate has been that if neighborhoods are created - featuring jobs, housing, and lifestyle amenities - then people would move there. However, recent trends point to the increasing importance of maintaining neighborhoods with the correct services and amenities for changing demographics. For example, as millennials get married, have children, and buy homes, the needs of this sector of the population will change. Lifestyle opportunities such as restaurants and bars, while still important, will be mixed with other demands as well, such as schooling options and activities for children.

This concept of building neighborhoods was discussed by Yonatan Binman, Head of Real Estate NYC – Venn, at the recent ULI New York Real Estate Outlook 2020. Several trends in the real estate industry were discussed at the event, as well as an outlook for the future. During a panel on housing, Mr. Binman discussed the progression of the phrase mentioned above: “if you build it, they will come” evolving to “if you build it, they will stay.” He provided an example of a community that his company worked to develop. As the demographics of the community shifted and included more children, a kindergarten was built to accommodate the families that had grown there.

The evolving nature of the real estate industry and the impacts of technology were additional key concepts discussed at the event.  Brad Greiwe, Co-Founder and Managing Partner at Fifth Wall, discussed the effects that technology will have on values in the future.

Mr. Greiwe gave two examples of such effects. First, evolving technology has the ability to quickly impact a sector such as industrial which includes distribution facilities. An example he provided was the growth of Amazon’s truck fleet, and how Amazon has the ability to use trucks, rather than buildings, to facilitate distribution. Through technology such as product recommendations and predictive analytics, companies like Amazon have the ability to identify products that consumers are likely to buy. Mr. Greiwe predicted a time, in the not-so-distant future, when an Amazon truck would have a pair of jeans already circling a neighborhood while a consumer in such neighborhood was finishing their order for such jeans. Another example of the evolving nature of real estate Mr. Greiwe discussed was the senior housing industry, which has seen significant development in recent years. As the population ages and remains healthy, older generations will want to, and be able to, stay home longer without having to go to a senior living facility.

The key to real estate, as Mr. Greiwe emphasized, is that many real estate owners and operators are now more in a hospitality business than just a leasing business. Generating value in real estate will require understanding tenant needs and being able to adapt as needed. As technology continues to change where and how people live, the real estate industry will need to embrace change to continue to thrive. As change has evolved from a specific event to more of a constant nature of the environment around us, opportunities for success in the industry will continue to be created as well.

About Michael Torhan

Michael Torhan is a Tax Partner in the Real Estate Services Group. He provides tax compliance and consulting services to clients in the real estate, hospitality, and financial services sectors.