Last Night at CREW New York: Three Economists Predict 2015
Last night, we stopped by UBS' Sixth Avenue offices for CREW New York's annual forecast event. Looks like commercial real estate is in for another great year, according to three top economists. But there are caveats. Their outlooks:
Yeskey Consulting & Investments' Dennis Yeskey
Dennis (above, with CREW New York's co-presidents, Wells Fargo's Christine Chipurnoi and Rhodes Associates' Jane Lyons) says it doesn't hurt to be cautious—and now may be a good time for realignment. "Nothing goes on forever," he says; we're entering the sixth year of recovery, and a seventh will be rare (if we get that far, it'll be the second-longest bull market since the Depression). The US is one of the only countries growing leaps and bounds. "I still worry about a black swan, but we may have a couple of years." His 2015 predictions: 2.7% to 3% GDP growth; flat interest rates, capx and dollar value; stock markets up 5% to 8%; REITs up 10%; and US residential slightly up.
Savills Studley's Heidi Learner
Heidi (right, with UBS' Leila Larijani, who hosted the event, and UBS' Jonathan Woloshin) says NYC is now at the point where job growth is starting to slow down, and coupled with more space efficiency, we may not see the same uptake of space like prior recoveries. New projects set to deliver in 2016 (like 3 WTC) will continue to put upward pressure on rents, particularly Downtown, where the supply of less-expensive space has contracted. Two wild cards: Will Hudson Yards become the new Midtown South, and will the Midtown East Rezoning re-emerge?
UBS' Jonathan Woloshin
Another 2015 wild card: Will investors balk at ever-lower cap rates? Jonathan says every 25 bp increase in interest rates requires 45 bps in annual NOI growth to keep investment value neutral, so investors have to ask themselves if they can justify rent rolls in this cap rate environment. "Don't get complacent about rates," he says. Three myths you should disregard, he says: Multifamily's best days are in the rearview mirror; CBD valuations have peaked and are unsustainable; and the mall is dead.
