Macklowe welcomes return of ‘responsible adults’ to market

The founder and CEO of the William Macklowe Company, offered up the analogy as he addressed a room full of lenders and investors as part of a 2012 breakfast series hosted by the Real Estate Lenders Association at the Yale Club in Midtown yesterday (Tuesday).

On the heels of a record-breaking leasing year and steady decreases in vacancy rates in 2011, he said Manhattan leasing activity and rents will stabilize in response to a slowdown in the city’s economy in 2012.

Macklowe said the greatest leasing year ever recorded — upwards of 30 million square feet in 2011 — has nowhere to go but down as a number of wildcards in the global and local economy loom over the city.

“New York City handled the recession far better than the rest of the country,” Macklowe said. “Our jobs and asset values have recovered… and global capital wants to be here. Zero percent interest rates help, as does the appearance of a safe haven, both politically and economically.”

But, he added, the “absolutely great” performance from 2011 isn’t sustainable, as the effects of the European debt crisis, instability in the Middle East, lack of political leadership in Washington and a continuing shift to a tech-focused economy have yet to play their course.

“We have some degree of trepidation with respect to the pacing of the capital markets,” he said, “Especially when one considers the relentless waves of conflicts and challenges.”

Macklowe expects Manhattan leasing activity in 2012 to come in around 18 million square feet and rents to remain stable throughout the year, while the performance of the sublease market will be heavily guided by changes on Wall Street.

As the financial services sector shrinks, the tech sector is filling part of the gap, as digital media companies continue to flood into Midtown South and beyond. The booming tech sector is ultimately good for the city, Macklowe said, adding that it’s “nice to see less reliance on the financial markets.”

The effects remain to be seen, however, as big banks are forced to manage their shrinking market share and physical space; and a shift to a different wage pattern — from finance to tech — impacts tax rolls, rents and vacancies.

What’s certain is that there continues to be no shortage of healthy capital available, signaling an end to a less-than-savory era in real estate.

“It almost feels as if we’ve never seen more capital available for investment,” Macklowe said.

“Given the lessons learned from the dark days of 2007 and into 2008, capital has become smarter… and capital today is in the hands of, dare I say, responsible adults.”