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Deals & Dealmakers

Interest rate worries dent confidence of city brokers

Brokers are confident in the overall health of the real estate market, but concerned over recent national and international economic issues, according to the Real Estate Board of New York’s (REBNY) latest Broker Confidence Index.

Photo by Mark Moz/ Flickr
Photo by Mark Moz/ Flickr

The Real Estate Broker Confidence Index in the fourth quarter of 2015 was 7.87, nearly a half a point drop from 8.34 last quarter.

The Real Estate Broker Confidence Index for the market six months from now also took a dip, declining to 7.57 from 7.87 last quarter.

“The softening of brokers’ confidence in the New York City real estate market follows on the heels of a strong year of healthy activity,” said John H. Banks, III, REBNY President.

“Our brokers are mindful of the potential impact of increased interest rates on future business decisions and questioning the sustainability of this extremely long and generous market cycle. Nevertheless, they remain positive on the City’s growing residential and commercial demand and standing as a safe haven for investment.”

The Commercial Broker Confidence Index in the fourth quarter of 2015 declined to 7.88 from 8.85 last quarter.

This decrease was attributed to commercial brokers’ anticipation of interest rate increases, their potential impact on job growth, as well as uncertainty about the local, national and global economy.

These factors — in addition to concerns regarding future financing for commercial real estate sales — also impacted the index for commercial brokers’ confidence in the market six months from now, which dipped to 7.24 from 8.10 last quarter.

One commercial broker noted that the sharp increase in interest rates, or a dramatic global event, would likely impact future market performance.

“Overall economic data and corporate growth looks anemic which will negatively impact tenant’s hiring and leasing activity,” concluded another.

One commercial broker attributed the slowdown in space absorption to the reduction in space allocated per employee despite tenants’ retention of their employees, while another identified increased supply as an additional factor.

In contrast to the slight decline in the Commercial Broker Confidence Index, REBNY’s residential brokers reported higher confidence levels than last quarter.

The Residential Broker Confidence Index increased slightly to 7.85 from 7.83 last quarter with brokers expressing a positive progression for the residential market.

Similarly, residential brokers’ confidence in the market six months rose to 7.90 from 7.58 last quarter.

Geographically, brokers noted that the Brooklyn rental market may provide competition for the Manhattan market. Additionally, New York City’s overall lack of inventory has continued to be an ongoing concern for REBNY’s residential brokers over the last two years.

Brokers indicated the need for more product for middle market Manhattan buyers and flagged the limited inventory of properties below $1 million.

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