NYC 2023 Commercial Real Estate Market: My (Designer) Take-Aways
By Diana Mosher
The NYC 2023 commercial real estate market will be another bumpy ride. More uncertainty means that lenders and developers will need more partners to get deals closed. According to panelists at Bisnow’s NYC State of the Market Summit, drawn-out approval processes and political infighting are still the top problems strangling housing production.
Panelists also noted that too many office building owners are still clinging to the idea that [all] the people are coming back.
There are many challenges ahead for NYC real estate investors. Read Bisnow’s conference coverage.
These are my take-aways from several panel discussions:
• In 2023 we’ll continue to see projects being built that came in under the deadline for Affordable New York. But what happens after that wave is completed? Some panelists favor repositioning commercial assets as residential. Not all commercial buildings can be repurposed as apartments.
• This is the time to diversify asset classes. Manufacturing assets are taking off in the Bronx and life science assets are taking off in Boston. Explore projects that are less interest rate-sensitive such as government, higher education and transportation.
• In Manhattan of course there is much uncertainty as office sector investors try to predict what the rent growth will be over the next decade. Many owners are still holding on to properties that have decreased in value because they are waiting for all the workers to come back to pre-pandemic levels. The average tenant is taking approximately 34 percent less space than before Covid.
• Many employees have returned to the office at least part time and they’re enjoying having more space to spread out. The push to provide Class A office space will help retain workers in the office. Older buildings have great bones and can be transformed into a competitive workplace destination… but will these amenity centers attract the numbers of employees to make it profitable? If you spend $10 million on an amenity space it needs to be worthwhile.
The Construction Scene
• In Westchester County, White Plains and Port Chester are seeing a downtown resurgence with growth spurred by empty nesters. One panelist noted that there is room to focus on both NYC and Westchester simultaneously.
• Lead time for construction materials, building supplies, furniture, etc. is still the biggest obstacle in development. One panelist said, “Can you get it? When can you get it? Let’s lock in those materials and services right now to avoid long lead times. Lead time is still the biggest hurdle.”
• Don’t give up on modular construction just yet. Modular construction continues to have its cheerleaders who look forward to fewer trades on site and less scaffolding. “I’m a big believer. It will come,” said one panelist.
• Get subcontractors, architects and designers together early on with better design collaboration up front.
This last take-away especially resonates because paying attention to interior design helps drive great business outcomes. If you’re planning a new construction or redevelopment project, let’s visualize the possibilities together. Click here to schedule a 30-minute interior design consultation today! Or call me at 347.840.2499.