November 2012
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Annual Conference and Leadership Breakfast on Today’s Market

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In a far-ranging discussion moderated by Michael Stoller (left) of WINS at the Oct. 18 BOMA/NY Annual Conference and Leadership Breakfast, panelists Peter H. Corrigan, RPA/LEED AP O M, AVP of Cassidy Turley, Inc.; Gaston Silva, Vornado Realty Trust COO; Jones Lang LaSalle’s President of the New York Tri-State Region, Peter Riguardi, and Bruce Mosler, Chairman of Global Brokerage of Cushman & Wakefield, Inc., spoke of  new paradigm shifts and the strength of traditional trends as they offered their best take on market conditions and staying competitive. 

Corporate responsibility, sustainability, exceptional service, a slow but steady recovery and New York’s still solid position as the number one real estate market in the world were the overriding messages sounded in the 90-minute discussion before a sold-out crowd at Club 101.

The Marketplace

Both veteran brokers agreed that New York is still the number one destination city and safe haven for global investment, and New York rentals remain highly competitive. Mosler (left) added that infrastructure is a line item that investors look at "first and foremost", and "they want to know, will that line grow and if so, by how much?"

New York’s technological boom—epitomized, in Mosler’s words, by "the Google lease and its paradigm-changing decision to bring programmers to New York"—will be a growth factor. Riguardi noted that Midtown South is holding its own against the other big tech locations such as, Houston and Silicon Valley. Tech firms are clustering in Midtown South to take advantage of that market’s large floorplates, which can accommodate companies on one floor and are aided by the fact that collaborative space—which Riguardi (below, right) called "the space of the future"—works well for those industries, that can house staff members in spaces of 75 to 80 sf.

In another paradigm shift, Riguardi said, some tech and creative firms are locating in the boroughs to allow employees to live and work in the same neighborhood. Re-urbanization is a long term trend, Riguardi stated, and credits the Millenial generation with embracing the trend.

Quality new space will be facing a shortage, Mosler noted, "as there are one or two years of good office space left." Infrastructure development will be critical to launching the West Side developments and to further expansion in the World Trade Center area, he added.

What Tenants Want

Corporate responsibility, such as that undertaken by Bank of America when it came on board with the Durst plan for One Bryant Park, provides financial advantages, Riguardi said, but "equally as important, and at the top of the list, is how facilities like that help in the retention of top talent."

Curb appeal is still king, both brokers agreed. Lobby appeal, how the space lays out and conforms to corporate needs, quality of the elevator system, how infrastructure can accommodate firms’ growing needs "these are all still critical," Mosler said.

"Personal service at the front of the house" is also crucial, Corrigan said (left), who pointed out that a small investment in a smoothly-functioning visitor management system can reduce queues to a minimum and build immeasurable good will. Training guards to greet tenants by name and other hotel-like services are no-cost items that provide a good return.

The Future

Fuel costs: Silva (below right) noted that the cost of electricity/steam, the density of New York City and the concurrent strain on the grid—one of the factors that contributed to Vornado’s decision to build a co-gen plant at One Penn Plaza—will continue to rise. Sustainable solutions such as co-gen "are worth considering. They provide savings and back-up power in emergencies," he concluded.

Rental rates: With current activity generated predominantly by renewals, Mosler said, rentals have not been driven upwards, which will be needed for the market to regain its health.

Post-Election Prospects: After the election and regardless of the outcome, companies may finally lift their restrictions on investment, both brokerage experts agreed. (Companies are currently estimated to be holding back more than a trillion dollars nationwide.) Releasing those dollars can generate some movement in the economy, but both Mosler and Riguardi cautioned that it took years to get into the Great Recession and will take years to get out.

They also called for government incentives for the development of downtown residential properties. Riguardi expressed hope for a greater sense of compromise and for all parties involved to find a way to stimulate the economy to make banks competitive again."

Mosler added that there was no easy solution to the Eurozone crisis but felt that budget cuts alone are not the answer, that there must be revenue growth as well. The Eurozone will hang together," he said, but it will be time-consuming as the countries involved work through such a complex situation. He ended on a note of cautious optimism: "The future will be bright, but we will not recover as quickly as we all would like."  He forecast a slow but steady growth rate of 2 to 2.5 percent.

It was a bankable forecast—just a few days later, the Congressional Budget Office revised its estimate for third-quarter growth upwards—to 2 percent.