Experts: slow, modified recovery for next 3 years – real estate

Experts: slow, modified recovery for next 3 years – real estate – Industry Overview

Real estate is coming back slowly but don’t look for the levels of the mid- to late 1980’s.

That’s the prognosis of three experts who addressed a special two hour session at the Grand Hyatt, “Appraising In A Down Market”, sponsored by The Metropolitan New York Chapter of the Appraisal Institute.

The key to the revival of the New York office market is jobs. Some 15,000 jobs are on the horizon for 1993, said Hugh F. Kelly, CRE, director, economic research & strategic studies at Landauer Associates.

That won’t be enough to make up for the losses since 1987 including 69,000 less jobs last year, said Kelly. But it should start momentum for a turn-around, if modest, of the New York office space market.

Many of the openings will be in the services sector spurred by the upturn in the national economy, said Kelly. There will also be new jobs on Wall Street and slow recovery in the banking industry.

A rosier picture in the residential sector was painted by Alan J. Rogers, managing director, Douglas Elliman – Gibbons & Ives. Sales picked up in the last two months of 1991, and “in January we hit the ground running,” said Rogers whose firm manages some 250 apartment buildings. Still, prices for co-op’s remain generally off 25 percent from 1988, and the condominium market has been down 10-15 percent in the last two years.

Prices have stabilized, according to Rogers, but look for an upturn in the middle of 1993.

Manhattan land sales, which bottomed out in 1991, lag behind the building and home markets, because there is still great uncertainty over the future of new construction, said Charles A. Shapiro, CRE, partner in Austrian, Roth & Partners, whose findings are based on that firm’s proprietary “Manhattan Land Index.

“Our research shows the virtual disappearance of site assemblage activity in 1989,” said Shapiro. “Both 1990 and 1991 were characterized by low numbers of land transactions, composed primarily of vacant parcel sales rather than assemblages.

“In 1992, there were 12 land or development transactions,” said Shapiro. “This compares with a peak of 53 transactions in 1981.”

There were different reactions by appraisers attending the program.

“My feeling is there is too much gloom and doom,” said Sheldon Gottleib, MAI, senior vice president of Jerome Haims Realty Inc. and a director of The Metropolitan New York Chapter of the Appraisal Institute.

“While existing space is being absorbed, I anticipate the planning and development of new construction. This is the traditional approach developers have taken to have their product ready and on-line before demand peaks.”

Robert Von Ancken, MAI, executive vice president of William A. White/Grubb & ElliS and an Appraisal Institute director, found estimates of office rents too high. “During a downturn, you have to consider “negotiating factor” — that is the spread between the owner’s asking rent and what is actually agreed upon in the lease,” he said. Other considerations include extensive work letters and free rent, according to Von Ancken.

COPYRIGHT 1992 Hagedorn Publication

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