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NY’s Commercial Real Estate Investment Follows a National Decline

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Despite Donald Trump being the first developer to be elected president of the United States, since his election commercial real estate investments have significantly declined across the country, especially in Trump’s home town of New York City, which is the largest market in the US.

According to data from brokerage firm Cushman & Wakefield Inc, property sales in New York City dropped 58% during the first quarter to $4.3 billion, compared with the same timeframe last year. This was the lowest volume of quarterly sales in the last six years. It was not much better for the rest of the country. The research firm Real Capital Analytics Inc. found that sales fell 18% nationwide.

Robert Verrone, a principal at Iron Hound Management Co., a real estate advisory firm based in New York, told Crain’s, “People are just not making decisions quickly at all. Everything in real estate is taking longer.”

Crain’s reports, “Much of the slowdown has nothing to do with Trump. Concern is mounting that real estate prices have peaked following six years of record-shattering growth, and there are signs of overbuilding in large cities such as New York and San Francisco—the biggest beneficiaries of the recent boom. Some of this hesitancy, however, can be traced to Trump’s gilded door. Real estate investors worry that Trump’s industry-friendly tax cuts will fail to pass. At the same time, others figure that lower taxes and higher spending could spark inflation and rising interest rates—a liability in the debt-driven business.”

Dave Bragg, an analyst at Green Street Advisors LLC., a real estate research firm based in Newport Beach, California, told Crain’s, “If the rules of the game they have been playing for 30 years might change, that gives investors pause.”

Deals around the nation aren’t being held up just by taxes, it’s the unpredictability of the outcome of Trump’s economic agenda that is causing hesitation. Jeff Friedman, a principal at Mesa West Capital, a real estate investment firm based in Los Angeles, said that before buyers and sellers sign on the dotted line they “need to have shared expectations.”

With sales of existing prices falling after a big boom in construction, developers are stuck with a surplus of hotels, apartment complexes and condos. Lenders are weary as rents and list prices are lowered by landlords.

According to Crain’s, “In Manhattan, even the biggest names in real estate are scrambling. To scale back debt, Harry Macklowe, a fixture in the business since the 1960s, is revamping his condo conversion of 1 Wall Street, a New York landmark. Macklowe is well aware of risk since he lost the General Motors Building to creditors during the financial crisis.

Time is money, and developers need more. They include Gary Barnett, known for building One57, one of the tallest operational residential skyscrapers in the city. Barnett’s Extell Development had to negotiate with lenders for time to find additional funding for Central Park Tower, a $3 billion skyscraper on West 57th Street that will house the city’s first Nordstrom store.”

By Mark Snyder

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