Robert Knakal

concrete thoughts

Four Real Estate Buying Opportunities (Psst… the Biggie Is In Retail)

At a recent taping of The Stoler Report, I was on a panel discussing the investment sales market in New York City and Michael Stoler asked us what we thought the best opportunities were in the market today given that many participants feel we are at or near the top of the present cycle.

I mentioned four areas where I saw opportunity. The first was any prime property in the Manhattan submarket. It is clear, even if we are at the top of the cycle, that if prime properties are not overleveraged, they will perform very well over the long run as we have seen the peak of each successive cycle significantly exceed the peak of the previous cycle. Another area where I see opportunity is anywhere in the outer boroughs around major transportation hubs. Affordable and workforce housing is essential for the future of the city and increasing zoning density is really the only way to effectively get there. Pragmatically, the City Planning Commission will increase densities around transportation hubs, which will increase property values there. Read More

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Your Hard-Earned Tax Dollars at Work

Reading the newspapers this past weekend made it abundantly clear that federal, state and local governments are increasingly looking for ways to raise new revenues to meet unfunded spending requirements and initiatives. Chicago is looking to pass gambling legislation to come up with a revenue stream for a $30 billion unfunded pension system liability. New Jersey is considering legalizing gambling in northern counties across the river to raise much-needed revenue and Connecticut is deciding whether to raise sales taxes and convert what was supposed to be a one-time corporate tax surcharge into a permanent tax obligation.

Here in New York, the clock is ticking on determining the fate of, among other things, the 421-a tax abatement program. Much has been written about this program, which is essentially an incentive to get private sector developers to create the desperately needed affordable housing that the local and state government does not have the money to create. Read More

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Has the Manhattan Submarket Peaked? Not Even Close!

Last week, in this column, I wrote about the overall investment sales market in New York City and its performance thus far through the first quarter of 2015. It appears that, on a citywide basis, the market has picked up right where it left off in 2014, which is remarkable given the epic year that last year was.

To recap, in 2014 there were $57.7 billion of investment sales citywide. This total was not quite the record of $62.2 billion seen in 2007 but still represented a 50 percent increase over the $38.4 billion which occurred in 2013. In terms of number of properties sold, the 2014 total reached an all-time record by a wide margin. There were 5,532 properties sold last year, eclipsing the 5,018 sold in 2007 by more than 10 percent. Read More

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How Real Is That Buyer Bidding on Your Property?

One of the most tangible trends in New York’s investment sales market since the recovery began in 2011 has been the influx of new buyers looking to purchase properties here. These investors have come to the Big Apple from across the United States as well as from every corner of the globe. And, yes, there are always new buyers entering the market, but it is the magnitude of this influx that has been so vivid this time around.

While this massive wave of newbies is positive for sellers looking to take advantage of this seemingly insatiable appetite, the flip side of the coin is the work brokers have to do to qualify these newcomers to determine if they actually have the capability to close a transaction. Not all can. In fact, we estimate that less than half of the folks who hold themselves out as potential buyers actually have the ability to make a purchase. Determining who’s got the goods and who doesn’t, is a critical skill. Read More

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How’m I Doin’, Buyers?

When answering the question, “How is the sales market today?” people in the market could respond in a variety of ways. For brokers and sellers, the answer is a resounding “incredible,” “fantastic” or “the best ever.” However, for buyers, the answers are much different. Things I often hear them say include, “It’s horrible out there,” “I can’t buy anything” and “I am looking outside New York City now.” Clearly, local buyers are still buying properties here at home but their frustration is palpable.

I often write about the supply/demand dynamic within the investment sales market and the king within this dynamic is almost always supply. In 1992, the Resolution Trust Corporation was liquidating properties from failed banks at such a rapid rate that the supply of properties for sale exceeded demand, but other than this one outlier, demand has always exceeded supply. Read More

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Just Say No… To Unsolicited Offers

One of the first courses I took freshman year at the Wharton School was Econ 101. One of the macroeconomic concepts introduced was Adam Smith’s paradox of value, often called “diamonds and water,” which explains the distinction between “value in use” and “value in exchange.” (Why diamonds cost a lot more than water, even though one is ornamental and the other is essential to life.) Another of my favorites was the classic production possibility curve most commonly illustrated by a “guns and butter” analogy, explaining the relationship between a nation’s investment in defense versus civilian goods.

But a more simple, and much more important, concept for commercial real estate market participants is the theory of efficient markets. This theory states that maximum pricing is achieved when information is available to the greatest number of people with the fewest barriers to entry. This is a concept that appears to be lost on a great number of investment property sellers in today’s booming investment sales market. With the volume of sales surging and values seemingly increasing on a weekly basis, many sellers are tempted to take an unsolicited offer thrown at them. After all, the offers seems too good to be true. It is significantly higher than the appraisal the owner received last year (or even a few months ago), or was much higher than the owner thought the property was worth.  Read More

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A Deeper Dive Into Interest Rates

In last week’s column, I wrote about interest rates and their impact on the commercial real estate investment sales market. Concrete Thoughts often produces calls and emails with questions and comments from readers but, last week, I received many more than usual. This was clearly a hot topic and one that requires additional examination.

In last week’s column, we looked at GDP growth, job creation and real median incomes and how mediocre these metrics have been since the recovery began. I used several statistics about the economic recovery going back to 2010. Some readers felt this unfairly discounted more recent activity and overstated the likelihood of interest rates staying low longer than expected, particularly if we look at the consensus among economists and the rhetoric coming out of the Fed’s meeting minutes. Clearly, recent activity, notably on the jobs front, has been more positive. Read More

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Interest Rates and Why They Matter

One could easily say that one of the main reasons why the investment sales market has performed so well for the past several years is because of the extraordinarily low interest rate environment we’ve been operating in. Low interest rates have been the rocket fuel that has supercharged the market, while the broader economy has been sputtering along in a mediocre fashion, at best.

The Fed has been keeping interest rates low, hoping that the low rates would spur economic activity. They were also hoping that the low interest rates would stimulate the housing market, which would create a wealth effect among American homeowners. The more equity homeowners felt they had in their homes, the wealthier they would feel and the more they would spend. While these two objectives are worthy, a tangential by-product of this low interest rate environment is strength in the commercial real estate sector. Read More

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The Biggest Problem with the US Economy Today is…..

For the commercial real estate industry, important economic metrics which impact the market’s underlying fundamentals, include GDP growth and job creation. While both of these metrics have been trending positively, they have not been performing at the level economic text books would predict based upon the magnitude of the Great Recession. Those books teach that economic cycles typically act like a rubber band. The more they are stretched in one direction, the more they should correct in the opposite direction.

Given the severity of the recession, predictions of annual GDP growth of 6 percent to 7 percent were common and estimates of job growth of at least several hundred thousand jobs per month were being equally tendered. Our recovery has been much more modest. But even with these less than thrilling improvements, the commercial real estate market, particularly in gateway cities, has recovered extraordinarily well. If you have read some of my recent columns, you know that I believe 2014 was, by far, the best year for investment sales in the 31 years I have been an active broker. Leasing data is very positive and expectations are that 2015 should be an excellent year for rental growth in all sectors, office, retail and residential. Read More

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Point of Origination

Two weeks ago, I wrote about the Massey Knakal/Cushman & Wakefield territory system and the benefits of that system. When discussing how business is generated and is handled between agents in different territories, I used the expression “origination” to refer to the genesis of a piece of business. I was surprised to receive several emails from readers asking me what origination was, how we determined who the originator was and if, and how, we tracked that metric.

It’s interesting that while originating business is probably the most important thing that we do in the brokerage industry, it is something that is really not focused on in many companies. There are three components of a commercial sale: 1) finding out someone wants to sell (originating the business), 2) securing the exclusive listing (assuming you only work on exclusives), and 3) executing the business. Of these three components, originating business opportunities is where the rubber meets the road. This is the case in any sales organization.   Read More

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Why Territory Systems Work

There have been some questions about Cushman & Wakefield’s intent to keep the Massey Knakal territory system in place for our New York City investment sales platform. A reporter called me recently to get my perspective on this. I was surprised that someone would question whether the territory system would survive.

So without discussing or referencing C&W’s plans, I thought I would share some background with you about how the territory system came to be, how it works and why it works so well in a dense urban marketplace. Read More

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How Record-High Demand is Driving New York Real Estate

As we enter 2015 with the wind at our backs in the investment sales market, it seems like a good time to consider the supply/demand dynamics currently driving the industry.

The most important metric for the market is supply. In the 31 years I’ve been a broker in New York City, supply exceeded demand only once, in 1992. That year, the Resolution Trust Corporation dumped hundreds of distressed properties from failed banks. Back then, the few investors who had money were hard-pressed to spend it on commercial real estate. Values at the time were about 70 percent lower than they were at the top of the market in 1988. By comparison, the 38 percent drop in values from 2007 to 2010 was little more than a speed bump. Read More

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Thanks REBNY!

Over the years of brokering investment sale transactions in New York City and running the recently sold Massey Knakal Realty Services, I have observed qualities that top brokers in our industry share. They have a strong passion for the business, work hard (and smart), think positively, effectively manage their time, set goals and display tremendous integrity. Another characteristic of top performing agents is their focus on networking.

While our buildings are made of bricks, mortar, glass and steel, our industry is a people business, and people generally work with people they know and like. The blocking and tackling of the brokerage business is sending out mailings and making phone calls. But there is no substitute for face-to-face interaction. These meetings are the key to networking, and relationships formed in-person are the most meaningful. Read More


Bob Knakal Explains the Rise and Sale of Massey Knakal

Robert Knakal (Kristy Leibowitz) is now the chairman of New York investment sales for C&W.

I sit here writing my Concrete Thoughts column for the first time as a member of Cushman & Wakefield. My new title is chairman of New York investment sales for C&W following the sale of Massey Knakal on New Year’s Eve (I cannot say more about the sale at the present time). My friend Peter Grant at The Wall Street Journal described the transaction as “a fairy-tale ending” for the firm which Paul Massey and I started quite a while ago. I disagree. This transaction more acutely represents not an ending but a wonderful new beginning.

During the past couple of months, knowing that this transaction was likely to happen, thoughts about my life at Massey Knakal have been running through my mind with vivid clarity—particularly the early days. Massey Knakal was started on Nov. 15, 1988, and the sale closed 26 years and 46 days later. So how did we get here? Read More