While many expect New York City’s real estate market to slow down in 2016, Bill Rudin, the vice chairman and CEO of commercial real estate firm Rudin Management, remains optimistic about the city’s prospects, pointing to the growing strength of the outer boroughs and the swelling ranks of young workers.
Rudin, whose company is currently co-developing a 675,000 s/f building at the Brooklyn Navy Yard called Dock 72, identified Brooklyn and Queens as the sources of his positive outlook.
He said that the migration of growth outside of Manhattan is necessary for the city to compete with other destinations for investment.
“For our city to grow, for our city to remain competitive on a global basis, we need to have a diverse set of product offerings for our companies. Up in the Bronx, Long Island City and Brooklyn, the requirements and the needs of companies are changing, and some of these companies are going to want to be in a certain part of Brooklyn because they can find the right product and the right pricing,” he said.
While growth in the outer boroughs is no longer a surprising development, Rudin said that such areas still face numerous obstacles. “(Brooklyn) is a very small market at this moment in terms of Class A space. I think it’s at 15 million feet,” he said. “Our product will be the first office building built in Brooklyn in several decades. It will have amenities and services that you don’t find in typical outer borough buildings that we think are important, particularly for smaller, medium-sized TAMI companies who are looking for ways to help attract and retain their employees… I think that we have to continue to re-invest in modern office buildings and renovate buildings to meet the needs of 21st century companies.”
Rudin also identified external threats. He pointed to the upcoming elections, the volatility of financial markets in China and Europe and the Federal Reserve’s recent interest rate hike as factors that may derail growth in the city.
Nonetheless, with the growing uniformity in office options across the city, he expects the movement of companies to flow in and out of Manhattan equally.
“I think that we’re going to continue to see the city’s economy diversify,” he said. “I think you will start seeing a combination of things. I think you will see a trend where there will be companies that are in Manhattan and are looking to get closer to their workforce and looking to the outer boroughs and particularly Brooklyn. We will also see continued organic growth of companies that are already located in Brooklyn and are having a hard time finding the appropriate space.”
In spite of the lack of trimmings in outer borough offices, he expects companies to continue to flock to such alternative options.
“I think the outer boroughs are where the young people are living and their companies are looking at ways to be closer to their workforce. I think there are more companies looking at products that have come online or are projected to come online,” he said.
The growth of the outer boroughs is inversely proportional to the waning strength of the Midtown Manhattan office market. The area, once the primary target for companies looking for prime office spaces, is facing stiff competition from new options, with recent high-profile defections from companies such as Wells Fargo and Boston Consulting Group.