Commercial real estate has felt as dramatic as a reality TV show these past 12 months
For better or worse, the biggest cliche that seeped into the commercial real estate conversation over the last year was: “Survive until ’25.”
It suggests something chilling about the prospects of the real estate business in the here and now. The industry has been through a great deal of turbulence and … apparently it’s not over. We have to put on our best Jeff Probst face and somehow make it through the next grueling seven months.
Or do we?
Almost all of the current woes of the real estate market have something to do with the deep freeze in the lending market specifically. At the end of last year, a thaw looked like it was on its way. Federal Reserve Chairman Jerome Powell (who might be the most feared man on this list and has thus earned a hearty No. 2 position) explicitly said that he planned to lower interest rates in 2024.
Not only did industry mavens breathe a sigh of relief, but almost immediately we saw more transactions. Leases started being signed again. Big ones. Fisher Brothers closed out the year with a 765,000-square-foot lease for Paul, Weiss, Rifkind, Wharton & Garrison at 1345 Avenue of the Americas — the largest such office deal nationally in 2023 — and proceeded to do another 150,000 square feet of leases in the same building.
Barclays renewed its 1.1 million-square-foot office at 745 Seventh Avenue the next month (destined to be the largest office lease of 2024?). In the last three months of 2023, SL Green clocked 500,000 square feet of leases, and in the first quarter of 2024 the firm could boast another 665,000 (two-thirds of which were new).
And there were big sales, too. Huge sales. Pre-pandemic-bring-tears-to-our-eyes sales. Jeff Sutton sold not one but two marquee Fifth Avenue properties to Prada and to Gucci owner Kering for a combined $1.8 billion. It felt like the good old days.
Of course, like any reality TV show, there’s always a twist.
While these stirrings at the beginning of the year were very real, some of the spring inflation numbers worried the aforementioned Mr. Powell. While he’s not raising interest rates, he’s not being pushed to lower them, either.
What does the scrappy contestant in Realty TV do?
Some are keeping their heads down and refinancing. Some are still getting ready to deploy all the dry powder that’s sitting around awaiting a spark. Some are raising even more capital to go after distressed assets. (This last category includes even those firms whose own assets are not on the sturdiest ground.)
Perhaps we thought of reality TV for the context of this year’s Power 100 because the last 18 months or so have shared the highs, the lows, the chaos, the backstabbing and all the other attributes we feel when we kick back with a glass of white zinfandel and watch “American Idol” or “The Amazing Race” or “The Great British Baking Show” or “The Bachelor,” or, yes, “Survivor.”
This year’s contestants — er, honorees — have shown the pluck, the determination, and the fortitude to make their ways onto this list, or keep their spots against fierce competition. Our congratulations to all. They will make it to ’25.
It’s the rest of the market we worry about.
