News
THAT'S ALL, BULLS
November 13, 2009
| Today’s market can be viewed as a Warner Brothers clip: Wile E. Coyote (aka, real estate) spent the past few years chasing after Road Runner (capital flows), and now Wile E. is taking a freefall off of the cliff. Either that, or Miller Ryan’s Jonathan Miller watched too many cartoons before opening ULI New York’s annual “Emerging Trends” report at The Union League Club yesterday. (With the market in freefall, can you blame his escapism?) |
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| The 31st annual report is the largest to date, with over 900 real estate individuals completing surveys or interviews. The takeaways: ’10 will be a test of who can survive; the next two years will present the opportunity of a lifetime on the buy side—if you have cash. We’ll see more gloom in ’10 as we hit the bottom, which will be worse than the early ‘90s. Housing will lead recovery, and we’ll see more write-downs and deleveraging. Expect growth in IPOs, litigation messes, and interest rates. |
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| The SRO audience of 375 listens in rapt attention to Jonathan, who says ’10 will not be a good year for retailers or developers. Apartment renters are doubling up, but the sector will come back first, while office users will seek productivity gains until its ’11-’12 recovery. Metaphorically: development and construction are on life support; lenders and CMBS bondholders are critical; conservative owners with re-fi issues are in serious condition; and public REITs and low-leveraged owners are stabilizing. The strongest markets, in order, are DC, San Francisco, Boston (mmm, Boston Market), NYC, Houston, Seattle, Denver, Dallas, LA, and San Diego. |
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| Benenson Capital’s Richard Kessler (ULI-NY’s incoming chair), Jonathan, O’Connor Capital Partners’ Joseph Zuber, Cushman & Wakefield Sonnenblick Goldman’s Steven Kohn, CBRE’s Darcy Stacom, Citadel Realty Advisors’ Joel Ross, and RREEF’s Chuck Leitner. Steve led a panel with Joseph, Darcy, and Chuck, who discussed what they’re seeing in the investment market. It’s not a timing game, but a long-term game with a new environment coming, says Chuck. We’ll be at the bottom for a long time, Joseph adds, as the market continues to trade space instead of create tenants. Watch for the flood of offshore capital, Darcy notes—the Bank of China, in particular, is looking to place $1B here. |
