There’s a Trump factor in retail real estate: REBNY panel

A faltering Chinese economy, falling oil prices, the strength of the dollar – there are any number of seemingly irrepressible forces that will shape the New York City real estate market in 2016.

And then there’s Donald Trump.

“From a retail point of view, I’ll be glad to get this election behind us.” Chase Welles, a partner at the Shopping Center Group, said Tuesday afternoon at a luncheon hosted by the Real Estate Board of New York at the New York Hilton. “I think that some of the international retailers are looking at the United States as a whole and waiting to see what exactly’s going on.”

“They’re sort of saying to themselves, ‘God forbid something really unexpected happens, maybe we’ll just sit around and watch this for a little while and make sure cooler heads prevail,’” he added.

Welles, whose clients include Whole Foods and Staples, joined brokers Helen Hwang of Meridian Capital Group, Hal Stein of Newmark Grubb Knight Frank and Sacha Zarba of CBRE on a panel moderated by Cushman & Wakefield’s tri-state president Ron LoRusso. The brokers discussed the state of the market and opined on trends that will shape the industry this year.

The panel discussion comes on the heels of REBNY’s inaugural investment sales report, which found the city’s sales volume during the second half of 2015 hit $34.3 billion, a year-over-year increase of 31 percent.

Queens, where dollar volume was up 93 percent year-over-year, and the Bronx, up 76 percent, faired particularly well.

Sales volume dropped in hotel and office properties (both down 17 percent) and retail properties (down 34 percent), according to REBNY. Despite the decreases, Hwang said retail is an asset class that is becoming increasingly more attractive to foreign buyers.

“We’re seeing a surge on the foreign side looking at core retail deals,” said Hwang, who moved to Meridian’s new investment sales division from Cushman last year. “Traditionally, retail assets have always traded at roughly 50 to 100 basis points higher in cap rates. But more recently in 2015 and even this year we saw that gap really tighten,” she said.

Welles said while high-street retail is taking a pause due to high asking rents, leasing activity is strong in the outer boroughs, which are less dependent on tourists and foreign buyers.

Newmark’s Stein said he’s looking forward to millenials “stepping into retail with new ideas.”

“From where I’m sitting, what I haven’t seen is new brands created by the millennial generation,” he said, adding that they have more likely made a bigger impact creating e-commerce brands.

CBRE’s Zarba said that tech companies generally start to pour money into real estate when they have raised between $15-million and $20 million in venture capital, and said that was the best moment for landlords to engage with these firms.

“The majority [of landlords] don’t understand the actual technology behind the business and need to get smart and understand what’s going on behind the actual business,” he said.