Panelists Talk About Rolling With the Punches in New York City Markets

New York City is at a turning point right now, with unpredictability in City Hall, looming mayoral elections and the Trump administration making investing a guessing game at best. But that doesn’t mean that the city’s movers and shakers are feeling pessimistic about the market.

Leaders in the real estate industry and government discussed the outlook for the city at Commercial Observer’s Future of New York event at Vornado Realty Trust (VNO)’s 2 Pennsylvania Plaza on Thursday. Amid the current uncertainty, participants still felt good about the future of Gotham as the city’s population was growing from the nadirs of the pandemic, offices are filling up, almost like the old days, while retail likely has never been better.

Real Estate Board of New York (REBNY) Chair and Two Trees Management principal Jed Walentas got the discourse underway at the forum, followed by Observer Media Chairman Joseph Meyer and Rep. Ritchie Torres.

“The United States and cities like New York are so underbuilt that we cannot afford to arbitrarily and artificially restrict the amount of financing for affordable housing,” Torres, a lead sponsor of the ASAP Housing Act, said in recorded remarks. “Instead of capping the volume of affordable housing financing, we should be uncapping the housing supply, which is the best and only path to unlocking affordability. But in addition to ending the volume cap, the federal government must adopt new tax benefits and incentivize commercial-to-residential conversions in order to aid the city’s recovery from COVID-19.”

The first fireside chat of the event saw Fried Frank’s Jonathan Mechanic pick the brain of David Arena, J.P. Morgan Chase’s head of real estate, who spoke about the development of the firm’s headquarters at 270 Park Avenue, on track to be one of the toniest office buildings in the city.

While construction of the tower in the Grand Central district commenced in a more predictable political era, Arena talked about how a feuding former mayor, Bill de Blasio, and former governor, Andrew Cuomo, derailed a deal for J.P. Morgan to move its headquarters to Hudson Yards.

“We looked at Hudson Yards and we got pretty close, we were going to buy a whole block in Hudson Yards,” Arena said. “In fact, that deal would have been done if de Blasio and Cuomo had communicated more rapidly or better. We actually had to bring someone in to help Cuomo and de Blasio come to an agreement on keeping us in New York. And by the time they did that, Mitsui Fudosan came in with $650 million and [Related Companies Chairman Stephen Ross] had to go in that direction.”

The first panel of the day, “New York 2025 Economic Outlook: The Policies, Industries & Market Conditions Driving Growth,” moderated by Commercial Observer Editor-in-Chief Max Gross, pulled insights from Michael Doty, senior director northeast originations for Nuveen Green Capital; Bruce Mosler, chairman of global brokerage for Cushman & Wakefield (CWK); Melissa Pumphrey, senior vice president of the New York City Economic Development Corporation; and Zachary Steinberg, senior vice president of policy for REBNY.

Discussions revolved around interest rates versus construction costs, a function of the Trump administration’s tariff policies, which could stifle growth. But with interest rates assumed to remain static, panelists said that developers will just have to work with those conditions in the long term and find savings elsewhere..

“I think everyone will adjust. The math problem to me is more likely to be solved, and all of the operator impact is certainly in construction costs and being able to develop buildings with slightly higher uniform costs,” Doty said. “Now that interest rates are at a more normalized level, something has to give, whether that’s the land basis or construction costs.”

Kramer Levin partner Dan Berman moderated the following panel, “Leading Investment Areas: What Are Domestic and Foreign Buyers Eyeing in 2025?” The panel featured William Elder, managing director of New York City for RXR; Benjamin Nevid, senior managing director for Meridian Capital Group; Shimon Shkury, president and founder of Ariel Property Advisors; and Lauren Young, managing director for Brookfield Real Estate Group.

“When it comes to free-market housing, the investment in it has a tremendous benefit. Everybody wants to be in free-market apartment buildings starting with institutions, market clients and international clients,” Shkury said. “[Institutions like KKR] are buying newer construction buildings that either have 421a incentives that are expiring or are completely free market. And they’re buying them because of the supply constraints in the city.”

Kasirer President Suri Kasirer led the following panel “Paving a Roadmap for New York City’s Success: City of Yes, Affordability, and Public-Private Collaboration” with Department of City Planning Executive Director Edith Hsu-Chen, GFP Real Estate Chairman Jeffrey Gural and REBNY Senior Vice President of planning Basha Gerhards. Public safety and federal funding cuts ended up being a pivotal topic.

“I have a lot of nonprofit tenants who are in trouble because the federal government is going through with plans to eliminate these agencies,” Gural said. “If you cut a $20 billion agency, that $20 billion was used to pay the employees. It’s also paying other nonprofits that do things like food, clothing, medicine. It’s got a ripple effect. So I’m seeing a lot of my small nonprofit tenants struggling, so that’s a concern. But, otherwise, I think we’re in good shape.”

Next, Yelena Nersesyan, real estate counsel for Linklaters, interviewed WeWork (WE) CEO John Santora during a fireside chat titled “NYC: A Global Talent, Tech & Business Capital — Attracting Major Industries With Big Economic Impact.” Santora said prebuilt spaces and ease of access is the key to attracting clients to coworking. 

“You don’t have to go through the whole lease process [with WeWork]. … We took down 304,000 square feet for Amazon [at 330 West 34th Street], short term,” Santora said. “Our agreement with them is for X amount of years. We match it with the landlord so that when the membership agreement expires, so does [WeWork’s] lease. We’re able to get them into the space within 90 days, start to finish.”

Gross was back to moderate the final panel of the event, “The Resurgence of Thriving CBDs and Neighborhoods.” With him were Andy Gottesman, vice chair and CEO of Avenue of the Americas Association and Gottesman Real Estate Partners; Thomas Grech, president and CEO of the Queens Chamber of Commerce; Alexandros Washburn, chief architect of Grand Penn Community Alliance; and Alyssa Zahler, managing director of commercial leasing for Two Trees.

“The whole thesis of our company is to create rich, mixed-use neighborhoods. We believe you have to have great residential, office and retail, and it all needs to be anchored by an awesome park,” Zahler said. “We’re seeing a real cross-pollination between residential tenants [near The Refinery at Domino] … 80 percent of the people in our buildings are either walking or biking to work.”

Mark Hallum can be reached at mhallum@commercialobserver.com.