Both citywide and business-to-business efforts will drive commercial real estate forward. At Commercial Observer’s latest forum – “The State of CRE: A Forward-Looking Industry Perspective and Vision for Market Growth” – industry experts highlighted the importance of collective improvements, such as l alignment with political development, and more subjective adjustments, such as modern office equipment, to drive growth in New York.
Both degrees of collaboration will lead to success – and have already done so.
Held in person at 605 Third Avenueit is Ease of receptionthe event opened with remarks from CO Maximum Gross and Robyn Reissas well as Crystal Fishermanco-founder of Ease Hospitality and general manager of commercial portfolio at developer and owner Fisher Brothers. Lamenting the loneliness caused by COVID-19, Fisher suggested the theme of connection will guide the design, creation and use of future spaces.
Echoes of connectivity resurfaced throughout the event.
Michel Zetlinsenior partner of a law firm Zetlin & De Chiarahosted a conversation with Andrew KimballCEO of a non-profit organization for the development of the city New York City Economic Development Corporation. In “Top priorities for the execution of the mayor’s economic plan”, the two men highlighted how the mayor Eric Adams possesses embraced the private sectorpaving the way for market growth in places like the Brooklyn Dockyard.
However, working in collaboration with the city is only one of the success factors in commercial real estate. Scouting a diverse ecosystem of talent, as well as engaging with academic resources, will not only yield results, but also reflect the population of the city as a whole.
“Our diversity is one of our greatest strengths,” Kimball said. “We must embrace it.”
Embracing diverse talents will incorporate the interests of the people of NYC into future projects. Likewise, listening to the different voices of the workforce will enable offices to respond to real and tangible needs.
Jennifer Yacherreal estate partner in a law firm Franck Frit, moderated the first panel: “Optimizing your square meter in a hybrid world”. She spoke with Ken Fisherpartner at Fisher Brothers; Callie HainesExecutive Vice President and Head of New York Region at Brookfield Properties; Tiffany Mizenreal estate manager in a technology company IBM; Bruce MoslerPresident of Global Brokerage at Cushman and Wakefield; and TessJonesCorporate Customer Success Manager at proptech company HqO.
Addressing the longevity of physical office spaces, panelists agreed that hybridity is the future, although there are strategies for landlords and employers to attract long-term employees. Getting tenants into the office – and keeping them there – requires the rapid integration of modern amenities into the built environment. These amenities can include collaborative space and curated dining facilities, as well as physical changes such as better air filtration and high natural lighting. Buildings that represent ESG standards and carbon neutral futures are also on tenants’ wish lists.
“You create spaces that allow people to socialize and work together while feeling safe,” Mizen said.
“What the workforce wants, the workforce gets,” Fisher agreed. “Those who haven’t done the work are the ones who suffer.”
Indeed, this may be the best time to be a tenant. Some landlords adapt quickly to the needs of tenants, while others are just getting started. Many buildings under construction have taken advantage of the lull in the pandemic to execute and complete projects. Now they’re ready to welcome an enthusiastic workforce, driven largely by younger employees.
This trend makes sense. Young careerists haven’t had enough networking opportunities and aren’t likely to live in environments ideal for remote work, thanks to roommates and cramped apartments. Meanwhile, established employees, who have already built their careers and learned the intricacies of the industry, may be more inclined — and prepared — to stay put.
Addressing inequalities and varying needs within a given company is therefore necessary to create a productive and happy workforce, the panelists said. No metric will work for everyone.
Neither metric will work for a given building. In “Adaptive Reuse & Recapitalization Projects Giving CRE A Future-Forward Competitive Edge”, moderator Jay A. Neveloffpartner and president of real estate at the law firm Kramer Levin Naftalis & Frankelspoke with Bill Edwardsexecutive vice-president of major holdings at Rockefeller Group; Robert T. Lapiduspresident and chief investment officer of the real estate developer L&L holding company; Jonathan SchwartzCEO of a financial company Walker and Dunlop; and Colleen Wenkepresident and chief operating officer of the developer Taconic Partners.
Adaptive reuse – the idea of converting old buildings to modern, more marketable uses – has become a popular tactic to reallocate spaces closed by COVID. Although not limited to New York, this concept has resulted in the modification of buildings across the city, diversifying New York’s economy. Specifically, life science buildings to have started to appear— although not every building should be a life science conversion, Wenke cautioned.
Life Science buildings require hyper-specific resources that older buildings in NYC may not be able to accommodate. Before changing the intent of a building, developers and investors should assess the attributes of that building, as well as the cost of capital for the conversion.
Beyond life sciences, residential spaces have largely taken over from closed offices. However, attracting tenants is not just about converting the uses of space; it’s more about flight to quality, Schwartz said.
Yet, whether it’s an office or an apartment, all buildings should entice tenants. COVID-19 – widely cited as the “great accelerator” – has forced real estate to evolve. Offices must now invest in attributes such as improved air traffic control and security systems, as well as collaboration spaces if they are to remain relevant.
The following panel, “Investment Sales on the Rise: Multifamily and Buoyant Markets Driving Deal Activity,” took a financial look at the future of real estate. Panelists included Steve Couttssales manager of a software company Cherre; Helen Hwangexecutive general manager of a real estate agency Meridian Capital Group; Bob Knakalpresident of investment sales in new york at brokerage JLL; and Miki NaftaliCEO of a development and investment company Naftali Group. Fred Berckco-manager of an accounting firm Friedman LLPmoderate the discussion.
Just as offices must entice tenants to return, the city must entice the private sector to invest. While New York has largely rebounded from the pandemic, more growth is still possible. If politics works hand in hand with industry – via incentives such as tax breaks – both sides benefit. As such, panelists agreed that voting is critical to market growth.
“Voter apathy is a killer,” Knakal said.
Besides political alignment, foresight is essential in deciding whether or not to invest in a project. Real estate is known to be resistant to change, Hwang said, and as the industry is now forced to evolve, data can be a useful tool in determining its scope. There is no universal truth for success, but as the technology, political landscape and city demographics fluctuate, nimble, yet informed decisions will allow investors to evolve. with the market, rather than against it.
Demand and product are also critical to success, although external factors can come into play. Knakal pointed to timing and luck as illogical and unpredictable inputs that can skew or influence a project’s output.
To keep with the theme of the rest of the event, the final discussion focused on the subjectivity of predictions and the inaccuracy of the universal forecast.
David Szekerpartner in a law firm Kasowitz Benson Torres, moderated the final panel: “A Deep Dive into CRE Projections: Financing Major Developments and Future Growth.” Szeker spoke with Marty BurgerCEO of a real estate owner and operator Silverstein Propertiesand Michael Cohentri-state president of a brokerage and investment management services company International Necklacesabout the impact of COVID-19 on the industry.
“Certain industries are more inclined to accept people working from home,” Szeker said.
The success of a hybrid model therefore depends on both the sector and the company.
“The legal industry’s dirty little secret is that the pandemic hasn’t been that bad for law firms or the PNLS,” Cohen said. “They thrived. These guys are able to conduct their business from anywhere and the world hasn’t stopped spinning.
Cohen then concluded the event with a caveat.
“There’s no way to generalize,” he said, alluding to an array of factors – booming amenities, hybrid work models, and more. – who have not yet fully played. The direction of the industry is still taking shape, and until it develops, predictions are just guesswork. Cohen also reminded the public of how much the vacancy rate has increased since 2019, adding, “It’s not something we can praise our exit from.”
At an event focused on the outlook for commercial real estate, the uncertainty is perhaps a generalization we can all agree on.
Anna Staropoli can be contacted at [email protected].