David Levy

What’s your take on the so-called Class B office market now in terms of demand? 

I couldn’t be more bullish on the New York City office market. The notion that demand for so-called Class B office buildings is disappearing has simply not been borne out by our experience. 

Quite the contrary. We are seeing tremendous leasing activity, growing rents, and a renewed appreciation for well-located, well-managed office buildings. I have never been a big believer in the distinction between Class A and Class B buildings. Tenants are looking for quality space, responsive management, good value and, increasingly, convenient transportation. The ability to get to work on one train, subway or bus without making multiple transfers has become a significant consideration in leasing decisions.

We call it the “one-seat commute,” and I believe its importance will only continue to grow.

What about office rents? Where are they now relative to a year or two ago — and where are they going? 

Office rents are growing, and in our portfolio we are seeing that growth on a daily basis. The improvement in leasing activity and tenant demand has given landlords greater pricing power, and I believe that trend will continue. 

However, what often gets overlooked is that operating expenses are also increasing significantly. Real estate taxes, insurance, labor, utilities and the costs associated with maintaining and improving buildings continue to rise. Higher rents are certainly welcome, but they don’t necessarily translate dollar for dollar into improved profitability. 

Ultimately, the health of the market depends on our ability to grow revenues while managing an increasingly expensive operating environment.

How important are amenities to luring office tenants?  

Amenities have become increasingly important, but I think the industry sometimes loses sight of what tenants actually value. Location, transportation, a well-maintained building, responsive management and a comfortable working environment are amenities in their own right. A beautiful rooftop or tenant lounge may help attract attention, but it doesn’t necessarily justify the investment in every building. 

We focus on improvements that meaningfully enhance the tenant experience rather than simply checking boxes on an amenity list. Different buildings serve different tenants, and what makes sense in a million-square-foot trophy tower may make very little sense in a smaller, older property. Good management and personal service never go out of style.

Has the city’s office-to-residential conversion wave peaked? Or are we still in early innings?

I think we are still in the early stages, although the number of buildings that can be successfully converted is probably smaller than some people believe. Conversions can be extremely complicated. Floor plates, light and air requirements, building systems, zoning, and construction costs all present challenges. Just because an office building has declined in value doesn’t automatically make it a viable residential conversion. 

That said, I believe conversions can play an important role in addressing the city’s housing shortage while removing some obsolete office inventory from the market. I view that as a positive development for both the residential and office markets. But conversions need to make economic sense, and government policy should help facilitate them rather than create additional obstacles.

What top two or three trends are you seeing in retail leasing in New York?  

We are seeing particularly strong demand for retail space in and around major transportation hubs. Locations that benefit from substantial pedestrian traffic, commuters and the growing number of employees returning to the office are performing exceptionally well.

I think the continued return to the office is having a very positive impact on street-level retail, particularly food and beverage operators, convenience-oriented businesses, and other retailers that serve the daily needs of office workers. 

At the same time, retailers are becoming increasingly selective about location. The difference between a good location and a great location can be enormous, even within a few blocks. I believe retail corridors with strong transportation access and consistent foot traffic will continue to outperform the broader market.

If you could change one area of global or local tumult, what would it be?  

I would focus on New York City’s regulatory and approval processes. New York is one of the greatest cities in the world, but we have made it unnecessarily difficult and expensive to build, renovate and operate real estate. The combination of complicated regulations, lengthy approval processes, and constantly increasing costs ultimately affects everyone, from property owners to small businesses to residents. 

I’m not suggesting we eliminate appropriate oversight or necessary protections. But there has to be a better balance between regulation and practicality. If we want New York to remain competitive, encourage investment and address our housing shortage, we need a regulatory environment that makes it easier to get things done.

Is the opportunistic investment window still open, or has it closed?  

I think the window is still open, although the opportunities are becoming more selective. One of the more interesting aspects of today’s market is the disconnect between the performance of certain office properties and their underlying valuations. We are seeing buildings with strong leasing activity and improving fundamentals that are still worth substantially less than they were just a few years ago. That creates opportunities, particularly for investors who understand the market, know how to operate buildings, and have patient capital.

But buying a building simply because it is significantly cheaper than it was five years ago isn’t an investment strategy. You still have to understand the real estate, the capital requirements, the financing and the long-term economics.

Lightning Round:

Your AI platform of choice? ChatGPT. ChatGPT. It’s become my second opinion on just about everything.

Who would play you in a movie? Obviously, George Clooney. I assume he’d insist.

One prompt you’d never give AI. Make all my decisions for me.

Jalen Brunson or Aaron Judge? Aaron Judge. Diehard Yankees fan. No contest.

“Oppenheimer” or “Odyssey”? “Odyssey.” Eh!

Tom Holland, Andrew Garfield or Tobey Maguire? Tobey Maguire. The original is hard to beat.

Have you ever eaten pizza with a knife and fork? Of course, but never a New York slice.

The most money you’ve ever spent on a hamburger? Haven’t eaten red meat in 40 years.

Bank or non-bank? Neither. I’m not a borrower.

Last book you read? One of Daniel Silva’s novels.

Borrowing costs — up or down in 2027? Not a borrower, so I don’t spend much time worrying about it.

What was your nickname when you grew up/started out? “D” Levy, to distinguish me from “S” Levy (Steve).

How long do we have before AI kills us all? It’s not going to kill us. I think it will make our lives better.

Where’s your secret escape compound? (Think Peter Thiel’s New Zealand Plan B.) It’s a secret.