Hines’ Sarah Hawkins Surveys Opportunities Up and Down the East Coast

When Sarah Hawkins, CEO of the East Region at Hines, started her journey with the global real estate firm in 2012 as an assistant project manager, she never expected her career trajectory to land her in the C-suite. 

Hawkins caught what she described as the “development bug” after working on her first project, Seven Bryant Park, a 30-story Manhattan building designed by Pei Cobb Freed & Partners. For Hawkins, being able to run her own projects and develop from the ground up was the ultimate career summit she hoped to reach.

“I loved running development projects, and I had a passion and a desire to move up, to be able to really lead my own projects, and that was what I was most focused on,” Hawkins said. “I shifted into being able to lead my own projects in 2015, and that felt like the pinnacle. I would not have assumed that I would one day be in the position I’m in.”

Hawkins took the top spot for Hines’ East region — which encompasses much of the Northeast, including New York, Philadelphia, Boston and Washington, D.C. — in 2021 following a stint as chief operating officer across the Eastern U.S. market beginning in 2019. Commercial Observer recently connected with Hawkins to discuss how she has spent the last three years leading during a time of elevated interest rates and economic uncertainty, among other topics.

This interview has been edited for length and clarity. 

Commercial Observer: What has been the biggest challenge in the commercial real estate space over the last few years?

Sarah Hawkins: The biggest challenge has been the run-up in interest rates, just across all real estate sectors. I don’t think there’s been any blend that’s been immune to the impact on debt financing across real estate. We’ve been in a position where in general our portfolio is relatively low-levered, and we have really strong, long-standing relationships with our banking partners. 

And, so, we’ve been in positions where we’re able to work through whatever the existing debt profile of the building is, where we have low enough leverage, where we’re able to ride through, or we’ve been able to work through refinancings or restructurings pretty effectively. But we’ve certainly spent a lot more time than we have in the years leading up to this working with our debt partners across assets.  

What has it been like to lead during this period of volatility?

It has been a hard few years, certainly the hardest in my career. I started working out of college in 2007, and got to experience the financial crisis. But I really didn’t have a lot of skin in the game — I was more of an observer. This time we are just deep in it, and it has lasted a long time. It has been a long, hard grind the last few years. 

So, moving from the pandemic through a dramatic real estate recession, the increase in interest rates, the lack of transactions —  it has been a hard time in real estate. I think we are coming out of it and we’re really optimistic about 2025. As real estate developers and investors, we tend to be pretty optimistic. At this time last year, I had felt like things were starting to look up, and expected us to get more shovels in the ground and more transactions, but it has been more muted this year than I expected.

How have those challenges impacted Hines’ portfolio and investment decisions?

The good news about our portfolio is we tend to be in the highest-quality and well-located assets, and those assets have performed well, have really retained value and performed well, even despite the downturn. So we’ve been in a privileged position of having, for the most part, more modern and well-located, modern or renovated assets.

If you look at an asset like One Vanderbilt, which we developed with SL Green, that office asset has the highest rates in New York City, is fully leased, has very attractive debt in place, and continues to outperform the market. It is incredibly well located, incredibly high quality, and has been a top performer in our portfolio.

On the residential side, we developed an asset in Sleepy Hollow, N.Y., and despite the run-up in interest rates and the downward pressure on real estate generally, we have outperformed rents, we have outperformed net operating income. We fully leased it up within a year, and that just speaks to being at a great location where the supply-demand fundamentals are still exceedingly strong. 

We have a large portfolio with our partners Norges [Bank Real Estate Management] and Trinity Church in Hudson Square. We recently completed a development at 555 Greenwich Street, which is an office asset that’s directly connected to the office where we’re located, our office at 345 Hudson. It’s a highly sustainable, brand-new office building that we just delivered, and we’re in the process of leasing it.

How has Hines been addressing the shift in workplace trends when it comes to office development?

Clearly, there’s been a major disruption in the office market, and, as we look at what’s the best way for us to be active, we see a tremendous opportunity in office credit. We see it in our own portfolio, where banks have really pulled back almost entirely from the office market. There are incredibly high-quality assets — with a great leasing profile, in great locations — and these assets are going to stay leased. These assets are going to retain their value, and yet it’s incredibly difficult to get debt financing. And, so, we see a pretty big opportunity to play in that space.

What factors go into the creation of a desirable office development?

It all starts with the right location. Being accessible and convenient and part of the mixed-use environment is more important than ever. You have to get the amenities right — access to outdoor space, access to clean air, having great food and beverage options, and making life convenient for tenants. People have talked about how hospitality has come to the office space, and it’s absolutely true.

The office buildings are there to serve the tenants and make life and work better and more convenient, and that has to be at the top of mind for any development. 

We’ve discussed residential and office assets. What about Hines’ foray into assisted living?

We’ve completed two senior housing developments in Manhattan: Sunrise at East 56th and The Apsley by Sunrise. They’re both beautiful buildings, one serving the Upper East Side community and the other the Upper West Side community. Those are completed, and we’re very proud of that partnership with Welltower. Those are both assisted living and memory care facilities. Those were our first two on the East Coast, and we expect that we will do more.

What about Hines’ portfolio outside of New York City? What is going on in the Jersey City market?

We acquired a large multifamily asset [Quinn, a 153-unit rental property at 197 Van Vorst Street] in Jersey City last year. This is a Class A multifamily in Jersey City, and we will benefit from the lack of supply in the broader New York City metropolitan market. 

If you look at the overall New York area, there’s very little new construction coming. And we expect, over the long term, we’re going to continue to see robust rent growth. And the suburban New York City markets are areas that we want to own more residential. At the location that we bought, you can be in New York City within 10 minutes. So it is incredibly accessible to New York City, but at a fraction of the price.

This summer, we acquired the Lenox and the Quinn through Hines U.S. Property Partners, the firm’s flagship commingled U.S. core-plus fund — two stabilized, adjacent, Class A multifamily buildings with 408 units combined. 

They have a mix of studio, one-bedroom and two-bedroom apartments with luxury finishes. The assets are highly amenitized and located in an attractive micro-location within Jersey City, with a premier school district and low-density brownstone neighborhood.  

What sets Jersey City apart from New York City?

The Jersey City waterfront offers a great quality of life. It’s a walkable community with an abundance of food and beverage options, good schools, a short commute to the city, and has large apartments with rents at a 40 percent discount to Manhattan. The average rent for a one-bedroom at the Lenox and the Quinn is $3,950. Like-kind products in Midtown rent for between $5,200 and $5,600. 

Does Hines have plans to develop more residential and office projects in Jersey City?

We think Jersey City is very attractive and would love to do more in the market. It is the fastest-growing metro in New Jersey, adding over 44,000 new residents since 2010 — increasing 110 percent, and millennials have increased by nearly 235 percent. That growth has enabled the market to absorb the supply. Over the last five years, 7,500 units were added to Jersey City, and average rents went up 4 percent a year in the Paulus Hook neighborhood and over 3 percent a year in Jersey City overall. Jersey’s City’s vacancy rate is below 3 percent today. We’re big believers in the value and quality of life Jersey City provides to renters.

What is Hines’ highest-conviction sector?

Our highest-conviction sector right now is residential, and it’s a sector that many of our investors have high conviction in as well, particularly on the East Coast

We have seen our markets outperform in terms of vacancies, so we have nearly 4 percent vacancy across the major metro areas on the East Coast, and it’s been around that level for the last 20 years. So, while East Coast markets did not see the run-up in rents that we saw through the pandemic in some of the Sun Belt markets, we also are now holding pretty steady with rent growth, and we believe that, looking forward, we’re going to experience real outperformance within the residential markets, particularly on the East Coast.

If you look across our markets, there’s a housing deficit of over 860,000 housing units, and supply has fallen off a cliff. We expect that deficit to continue to grow through 2030, so we are putting a lot of effort into both multifamily opportunities, but also single-family opportunities.

Can you describe how you’re leaning into these opportunities, specifically?

Many people may not know that we have a pretty large-scale lot-development business. We’ve always had that business in Texas and parts of the Southwest, but we’ve also been very active in Northern Virginia, where we partner with homebuilders and with equity investors to acquire large, horizontal lot developments and turn over lots to homebuilders. 

Northern Virginia is probably our favorite market for that. We’re just finishing up our first really large-scale lot development called Hartland in Loudoun County. It’s been hugely successful, and we closed on two more lot developments this past year. So, that’s a business we’re going to continue to really lean into.

We also have eight multifamily projects that are under control and pre-development. With the impact of this year, we had expected that we would start a couple of those projects this year, but, just given the dynamics in the market and investor interest, we’ve pushed those to next year. But we’re feeling really confident in 2025 that those will get started, and those are at really reset numbers that can achieve a really attractive yield on cost. And we think we’ll be able to generate significant rent growth given the lack of supply.

Now let’s have some fun! Tell us more about your life.

I’m the mom of three young boys, so life is busy with work and family. The boys go to an all-boys school, and yesterday I had the honor of presenting a lesson on skyscrapers to 50 kindergarten boys. There were endless questions, and I loved every minute of it. It was a great reminder of what fun and interesting work we do, and what a privilege it is to play a small part in improving our cities and creating amazing spaces for our friends and neighbors. 

Amanda Schiavo can be reached at aschiavo@commercialobserver.com.