New Cushman & Wakefield Execs Lean Into Opportunity in the Economic Iffiness

Ah, volatility, you tricky son of a gun.

As though we’re stuck in an elongated “The Hunger Games” movie, the commercial real estate industry has had several arrows aimed toward it over the past five-plus years. From a pandemic, to rising interest rates, to (more recently) a global trade war, any one of those arrowheads had the ability to take a transaction, company or property out of the game once and for all. 

Still, with each arrow — or market jolt — came a period of ensuing volatility and dislocation, along with rare, new opportunities to invest, acquire, finance, recap or take space. 

For Cushman & Wakefield, the aim of the game has been advising clients at every twist and turn, buoyed by a recent internal operational evolution. That evolution involves a new guard, of sorts, as the firm’s next generation of leaders takes the reins, and leans in. 

Leading market strategy at the regional level today is Todd Schwartz, a 26-year firm veteran who just took over Toby Dodd’s role as regional president for the Northeast region (Dodd is now chief revenue officer for the Americas), and Victoria Malkin, who was promoted from president of the Central U.S. region to president of Americas markets in November. 

The boots on the ground execution of said strategy in the Northeast includes Ethan Silverstein, C&W’s top office and No. 1 overall broker, and Mike O’Neill, C&W’s top retail broker. They joined the firm right out of school in 2007 and 2002, respectivel. Further, Silverstein is the youngest-ever executive vice chairman at the firm, having learned the business from longtime Global Brokerage Chairman Bruce Mosler himself.

Commercial Observer checked in with the foursome just over a month after “Liberation Day” on April 2, when the industry was still absorbing what tariff policies meant for commercial real estate, and the stock market was trying to recover from ongoing motion sickness between alternating nosedives and rallies. 

Thunder jolt

“From a service provider perspective, I don’t think there’s ever been a better opportunity to advise clients, whether that’s occupiers of real estate or investors in the universe of real estate,” Silverstein said. “At a platform like this, we have all the resources and we have all the capabilities — and, when I say that we have resources, it’s really our talent. 

“I can go anywhere within the four walls of the company and say, ‘I have a situation,’ and even if it’s never occurred before — because everything is so dynamically changing — we have shared experiences and data to help advise our clients,” Silverstein added. “I personally think there’ll be a lot of deal volume over the next 24 months.”

That deal volume will stem, in part, from the type of market jolts we’ve all gotten used to and are perhaps a little less afraid of these days — akin to the repeated exposure to feared stimuli or situations in exposure therapy. 

“Things reset with jolts — across asset classes,” Silverstein said. “I think there’s going to be a lot of fortunes made across asset classes, and a lot of changes occurring.” 

After all, while COVID muted marketplace activity for the most part, what followed these past three years was one of the most dynamic marketplaces in some time in New York and beyond, with contradictions and resets driving much of the opportunity, Silverstein said: “I’m seeing huge opportunity in office, industrial, data centers — any one of those sectors. The top 10 percent of office space has surpassed highs from a rental perspective in the history of New York City; the bottom 10 or 20 percent of the market is effectively obsolete as office space; and everything in the middle is fighting for its relevance and figuring out what it should be in the future.”

In real estate terms, data centers are hotter tickets than the Cowboy Carter Tour, and  Silverstein pointed to the resetting impact of Microsoft’s plans to spend $80 billion on artificial intelligence data centers in 2025. 

“That’s a substantial amount of land that has to be purchased, and a substantial amount of electrical power that needs to be created, packaged and sold,” Silverstein said. “So it’s a complete reset. Roughly 3 percent of today’s electricity is used for data centers. There’s predictions that 10 years from now, 99 percent of the electrical power produced in the United States could be used to power these data centers.” 

Then, there’s repurposing.

 “We’re also seeing interest in old — and when I say ‘old’ it’s almost an oxymoron — old Bitcoin mining facilities that are no longer at their highest and best uses,” Silverstein said. “Because we’re in such a dynamic marketplace today, there’s opportunities for a data center provider to develop a data center as the new highest and best use of that physical land.”

The data center conversation encapsulates the current market moment, Todd Schwartz said. “I think we’re all now accepting that we are in an exponential change driven by technology, and the reality is, it places a premium on how nimble you can be with your talent and how quickly you can marshal resources,” he said. “Coming out of COVID, we’ve created a culture here where our people aren’t siloed. There are teams, but they share information generously with each other. You have to be able to get information quicker than ever before as the data is becoming ubiquitous. As that happens, you need systems we can talk to, but you also need people who are working together in a very special way.”  

Retail details 

In terms of asset makeovers and resets these past few years, retail perhaps takes the crown.  

“The post-COVID recovery has been nothing short of extraordinary,” O’Neill said. “When we concluded our statistics at the end of the first quarter of this year, the availability rate in Manhattan was the lowest it’s been in 10 years, since the market peak in mid-2015. We’ve seen tremendous absorption among the major high streets and neighborhoods within Manhattan, but it extends nationally as well, and we’ve seen tremendous absorption among the major shopping corridors in all the urban markets across the country.” 

With the tariff situation, however, comes some more uncertainty, and with that uncertainty comes “a lack of long-term commitments,” O’Neill said, particularly with retailers in the apparel and footwear categories that will be facing significantly higher costs for some time. 

“We’ve certainly seen instances where retailers utilize this uncertainty as a reason to hit the pause button,” O’Neill said. “It’s something we’re going to have to navigate through as we see what this all means. But, the majority of the high streets across the U.S. are still very strong.” 

O’Neill said he’s also seeing situations where retailers aren’t prepared to allocate capital to build stores in the near term. “The tweaks we’re seeing are typically trying to push projects off, move possession dates out or move store openings out,” he said. “It depends on the size of the company and the individual brand, of course, but we’ve seen more of a focus on preserving capital, because there’s an increased cost in the interim period that a lot of these retailers weren’t anticipating.” 

Retail is feeling the immediate impact of the trade war, but among the retail brands most impacted in the near term are the U.S.-based companies generating all of their revenues domestically. 

“If you’re a large global brand generating revenue all over the world, you’re much more diversified,” O’Neill said. “We’ve seen those retailers play through this and take the longer-term perspective on it.” 

Lease terminations are also “a point of discussion,” O’Neill said. “There are various ways to achieve it, whether it involves early termination or certain levels of flexibilities to sublease an assignment. There are certain instances when landlords want flexibility as well. So, you figure out how to pull those pieces together.” 

Over the past few years, O’Neill’s team has represented Gucci, Saint Laurent, Alexander McQueen and several others on a national basis. “It’s been a pretty incredible time for that category,” O’Neill said. 

Several occupiers and high-end retailers bought up Manhattan real estate in the past two years. And, with tariff-related choppiness, the window of opportunity for those activities could be extended, he said. 

“I think you will see it continue, but it’s going to be limited to what I would describe as — for the most part — global flagship-type positions that can’t be replicated,” O’Neill said. “There are a limited number of brands that have the wherewithal to acquire those types of positions, and I don’t see it happening in secondary or tertiary markets. You’ll see a handful of brands look at something on Fifth Avenue, Madison Avenue, Rodeo Drive — the highest of high street addresses, but I don’t think it’s going to replace long-term leasing.”

“The interest rate part of this equation is really important, and there’s also so much uncertainty around that,” Silverstein added. “But I agree that we’re certainly looking at what I would expect: a prolonged period of opportunity in the office sector. There will be purchases that we’ll look back on 10 years from now, where people will say ‘We should have purchased this asset,’ because some folks will make purely generational purchases that will look extraordinary from a return basis in five or 10 years.” 

For O’Neill, market jolts create a level of clarity. Case in point: The relentless chatter about e-commerce killing brick and mortar that has pervaded much of his career. 

“The irony of COVID, in a lot of ways, is it demonstrated — in an undeniable fashion — the importance of brick and mortar. And that conversation has finally quietened significantly, because even e-commerce brands, I think, recognize the importance of having a physical presence,” he said. “I’ll use Manhattan as an example. The market from 2018 to 2020 wasn’t broken entirely, but it was fractured, and we probably would have limped along in a recovery with the death of brick and mortar in the backdrop for a five- to 10-year period. Instead, what ended up ironically happening was the recovery was sped up into a nine- to 12-month period of time from February 2021. So with these jolts, oftentimes there’s pain, but afterward it creates this level of clarity — and opportunity.” 

“Our professionals are really deep experts in what they do, whether it’s retail, whether it’s data centers, whether it’s industrial, whatever it is — they have this really deep expertise and knowledge. And then we back that with data and insights and research and our platform to support them,” Malkin said. “From my perspective, everyone’s situation is different, everyone’s issues and strengths are different. So what they’re looking for is someone who can really understand those nuances of the market, of the business, of the service line, whatever it might be, to help them. But I think that’s really advisory work, and that’s what our business has shifted to become. It’s not about a lease expiration.” 

Given it’s all about the advisory work today, despite the myriad sectors C&W covers and services it offers, there’s one question Silverstein hears repeatedly: “Where should we invest capital?” 

“Historically, investors had a very well thought-out plan for their buckets of capital,” he said. “It was Class A office space in certain cities, industrial space in X part of the country. Now, we’re finding that investors have either said, ‘I’ve raised capital that’s flexible and we have more discretion of where we want to invest,’ or ‘I’m about to go raise capital and I want to come up with a thesis,’ or ‘I haven’t raised any committed capital at a point, but I want to go to a sector where I can potentially find opportunities.’ So, they’re often asking us: ‘Where should I invest capital?’ — not just what city, but then what segment or what sector, whether it’s retail or office.” 

As one option, there’s opportunity now for companies that have historically only invested in office buildings to invest in office-to-resi conversion projects. “They had to make a pivot in their core business plan based upon the general reset of the market,” Silverstein said. 

As such, the team’s first priority isn’t the transaction, but giving the best advice they can. 

Still, the second half of this year is going to tell the real market story, Schwartz said: “We don’t know if we’re going to have whiplash again around the tariff structures. There’s uncertainty around uncertainty. But our job isn’t to create a deal; our job is to create an environment where they have the absolute best information.”

Because of the speed at which the industry is progressing now, “We’ll be able to leapfrog whatever we thought we could do five years ago because of AI,” Malkin said. “That data at a company as big as ours is incredibly powerful because it spans the world. It spans all these different product types, all these different service lines. So the ability that we now have as an industry and as a company to harness that data and use it to inform decision-making is really exciting, and it’s a huge priority for us.”

It’s not the only priority. 

C&W has recruited 20 capital markets teams in the last six months and more than 20 leasing teams this year alone. “We’re fanatically focused on growing, and it’s really strategic,” Malkin said. “It’s not just adding bodies, though. It’s making sure we add people who fit with our values and our culture, and people that Ethan and Mike want to bring to a meeting because they’re as good as they are, and they’re going to bring a different expertise and a different point of view.” 

Growing its capital markets business and its surrounding operating model is something C&W has been particularly focused on and investing in of late. In November, it brought in Miles Treaster to lead the capital markets business.  

“We only bring in people with shared, aligned values who can help us grow this business, are great at what they do, but are also people who fit within our fabric,” Schwartz said. “People believe in each other here, and are willing to work and share data generously and have each other’s backs all the time. I think that approach lifts an entire boat.” 

Cathy Cunningham can be reached at ccunningham@commercialobserver.com.