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Survey shows New York owners believe pricing has peaked

Commercial property values in New York City are reaching the “top of the rollercoaster” according to a survey by accounting firm, Marks Paneth.

Citing the Spring 2015 Gotham Commercial Real Estate Monitor — which surveyed more than 100 New York commercial property owners, brokers, agents, engineers, accountants and lawyers specializing in the commercial space — Marks Paneth reported that 54 percent of executives agree that commercial property values have ended their climb.

The findings also show that 22 percent of those surveyed feel that commercial property values are near a decline. 37 percent of those polled believe that no drop was imminent.

11 Madison Avenue sold for $2.3 billion
11 Madison Avenue sold for $2.3 billion

“Since 2013, a lot of property executives have said commercial real estate in New York is overvalued compared with property in other major cities. But now the view has reached something of a tipping point: Most don’t see values going any higher, at least in the current, long cycle. It will be interesting to see if this is the case — and whether owners start trying to cash out,” said William H. Jennings, partner-in-charge of the Real Estate Group at Marks Paneth.

The study said that 26 percent of executives feel that Manhattan commercial real estate is “highly overvalued,” and about 50 percent label it as “moderately overvalued.”

These numbers contrast findings from January 2013 which saw only eight percent of the sample referring to the market as “highly overvalued.”

It’s natural for even the strongest real estate cycles to reach inevitable plateaus and dips. However, there are those within the market who are not yet convinced that darker days are right around the corner.

WILLIAM H. JENNINGS
WILLIAM H. JENNINGS

“Not for the balance of this year for sure,” chairman of New York investment sales for Cushman & Wakefield, Bob Knakal told Real Estate Weekly when asked if he saw a stall on the horizon. “We see continued upward pressure on pricing and I believe that that will continue for the balance of this year.”

But will prices taper off in 2016? “It’s tough to say,” Knakal admitted. “There are so many things that go into it. What’s going to happen with interest rates? What’s going to happen with policy relative to real estate with the election coming up next year?

“What is going to happen with the demand coming from tenants? Are we still going to have tremendous population influx in New York?”

Knakal also pointed to the volatile nature of rates on bonds and the uncertainty surrounding the equities market as possible factors that will determine when (and if) the commercial real estate market in the city will bog down.

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