Even In an Industry That’s Seen It All, the Future is Hard to PredictNovember 17, 2020
Highlights from Marks Paneth’s New York Real Estate State of the Market Seminar
By Pamela Fischer, CPA
As the rest of the world is also experiencing, New York has gone through some drastic changes as a result of the ongoing pandemic. One of the most jarring changes has been the impact of COVID-19 on New York real estate. On the morning of November 4, 2020, Marks Paneth presented its second New York State Real Estate State of the Market Seminar, bringing together voices from the industry to illuminate the greatest challenges and opportunities that have arisen as a result.
Featured speakers included moderator Michael Stoler, President and CEO of New York Real Estate TV, panelists Jeffrey Gural, Chairman and Principal of GFP Real Estate, Eric Gural and Brian Steinwurtzel, Co-CEOs of GFP Real Estate, and Dean Boyer, Director in Marks Paneth’s Technology Services Group. Highlights from the seminar are below.
New Leases Are Still Being Signed
As the morning began, Brian Steinwurtzel shared good news, noting that despite the tough times that many tenants are facing, there are new leases being signed. Certainly, it is not as many as pre-COVID times, but it is important to note that there is lease activity still happening. According to Steinwurtzel, many of the leases signed within the last seven months during COVID-19 have been with entrepreneurial-type tenants who received significant funding to launch a (hopefully) successful product, or with companies that are well-established and know that they will continue to be in operation for years to come.
Building Occupancy Remains a Key Concern
A majority of the GFP portfolio consists of commercial and retail properties, and they know firsthand that tenants are the key to success. Jeffrey Gural shared a fundamental truth that will resonate with many building owners: “As an owner of real estate, we have a disadvantage in our business—we cannot move our buildings, and tenants can move.” It is with this mindset that the entire Gural group has continued working with tenants to provide them every opportunity to remain in their current location. When asked about specific occupancy trends, Eric Gural mentioned that outer-lying areas such as the garment center have seen an uptick in tenants who have returned to in-person operations, versus mid-town office/retail areas which have seen a slower return in occupancy as employees continue working remotely.
How Restaurants are Coping
Restaurants and other food vendors occupy many commercial spaces in buildings throughout New York. As a result of ever-changing restrictions imposed during this pandemic, restaurants have had to adapt constantly, which has unsurprisingly impacted their revenue. The slow return to midtown offices also means fewer people are visiting restaurants or other food vendors in the area. As a result, many landlords have adopted a percentage rent deal with these tenants, and GFP is no exception. Jeffrey Gural expects that the upcoming months will continue to be a struggle for these tenants, and a percentage rent agreement will hopefully provide the best results for all parties involved.
Focusing on Potential Growth Areas
Two areas of New York real estate considered to show promising growth and potential are dormitory projects and life sciences buildings, and GFP has been involved in both types of project. Especially given the pandemic, it is no surprise that the life sciences sector is booming in New York, and this is an area where there is a significant pipeline of potential new tenants. The long-term leasing and owning of dormitory projects make these investments appetizing for real estate investors, and though the state of the market is currently unsettling, this niche is one that GFP expects may continue to grow throughout New York and the surrounding areas.
When discussing additional sectors that are still seeing growth, Jeffrey Gural shared that he believes one of the safest bets in New York real estate right now lies within the distribution industry. There is a huge demand for companies that need space for well-located distribution facilities which is evidenced by the increase in online retail and orders experienced by companies of all kinds. Locating the right area for these facilities may be tricky, but if found, could prove quite successful.
Analytics Are Poised to Drive Actionable Insight
Dean Boyer, Director in the Technology Services Group at Marks Paneth, provided an in-depth look at how data analytics can help real estate firms gain insight into their business operations. As all of the morning’s speakers noted, the real estate market has undergone tremendous change in these past months. One of the tools of understanding and managing change is data analytics, and to start the process, real estate professionals should be aware of and use the data that is available to them. One of the areas discussed by Boyer which is relevant to the market today is location analytics. With people and businesses shifting their location due to the pandemic, many real estate professionals have branched out into other locations in and around New York City. The use of data analytics can provide a deeper understanding of an area’s potential for growth and development, even down to which industries or types of tenants would be most likely to move in.
With regard to New York real estate, Jeffrey Gural may have said it best: “…I’ve seen it all – and the one thing I’ve learned is it’s really hard to predict.” Even the most seasoned industry professionals cannot be sure of what the future holds for New York real estate, but all of the speakers at Marks Paneth’s New York Real Estate State of the Market seminar maintained a positive outlook as they considered this resilient industry and vibrant city—and what lies ahead.