Yikes! What a year.
Clearly we are not out of the woods yet, but while many are rehashing the gloom-and-doom events of 2009 when it comes to the economy and real estate, it might be worth taking a minute to look at how bad it could have been.
If you remember the first months of 2009, if you haven’t blocked them out, the term “Depression” was being bandied about quite a bit. How many companies would go under, people asked themselves, and would my company fold? Would we see a 25 percent joblessness rate?
I edited a story in March loosely comparing our plight to the Depression of the 1930s, mentioning in the headline how there of course wouldn’t be any “tent cities” this time around. A few days later, a bad sign, there it was — a photo of a tent city in California on the cover of the New York Times. There was dinner-table discussion (at my dinner table, anyway) about how frozen the credit markets would get and, say, would you suddenly be unable to withdraw money from ATM machines?
But the worst never did come to pass (which is not to say that some major pain doesn’t lie ahead).
Sure, ice buckets were thrown. But not everybody was throwing ice buckets. Only a few developers flamed out spectacularly. For the most part, people buckled down, gritted their teeth and held on (Bruce Ratner at Atlantic Yards and Joe Sitt at Coney Island were impressive examples of this in two of the bigger real estate stories of the year).
When it came to brokerages, it was mostly the smaller fish that disappeared. The biggest residential brokerage to go under was Coldwell Banker Hunt Kennedy, the ninth biggest firm in Manhattan. No large commercial brokerages failed.
Things are still a lot worse in other cities. And one could make the argument that price drops in the Manhattan residential market of 20 percent were not unreasonable given the run-up in values (prices rose 60 percent from the beginning of 2003 to the very top of the market).
Of course, the drop-off in New York City commercial real estate prices is another matter. Prices may be down in the range of 70 percent, according to one estimate. But there are so few transactions, it’s hard to tell. (And that was, of course, the toughest thing about this year — the lack of transactions.)
The economic fallout shows just how hard it is to predict or control the markets.
Indeed, if we were to turn a corner, we wouldn’t know it until we did. As commercial broker Bob Knakal pointed out in his StreetWise blog recently, “We will only really know we have hit bottom after we have emerged from it.”
Or maybe unanimous prognostications that the market will drop further are signs that it will actually go up, paradoxically. As Noah Freedman, principal at residential brokerage Bond New York, pointed out in our residential market report this month: “You may even see some price appreciation again … Whenever everyone becomes so convinced a market, any market, will only proceed in one direction, it is usually about to do the exact opposite.” (Click here to read story “Busy holiday sparks hope for New Year.”)
But even if no one can predict the market, there are still key insights to be gleaned in our stories this month that help explain what’s going on.
Reporter Candace Taylor’s story, “Scions in spotlight,” looks at the offspring of New York’s biggest real estate families and how they are taking advantage of opportunities in the down market (when many of these dynasties with a long-term view do their buying and building). The story also looks at how some of this younger generation pushed their typically conservative families to take risky bets during the boom, with a number of those deals now in trouble.
In “CBRE’s New York slide,” reporter Adam Pincus delves behind the scenes at the biggest commercial brokerage firm in New York, looking at the company’s business strategy in dealing with the slow market. It’s an interesting look at the politics and big personalities at CBRE, and definitely worth a read.
Also worth a look is our special supplement on Lower Manhattan, put together by our new deputy managing editor, Matthew Strozier, who comes to us from the Sun-Sentinel in Florida and who we are very happy to have on board. It’s an exhaustive look at what’s going on in that neighborhood’s commercial and residential markets, with stories, charts, graphs and maps.
Finally, check out reporter Sarah Ryley’s package of stories on foreclosures, obviously one of the most devastating aspects of the real estate crisis. Beginning with “Higher-priced homes get turned on their heads,” it presents some eye-opening trends, including that Manhattan co-ops are not as insulated from foreclosure as many believe and that new condos in Brooklyn are seeing sizable foreclosure numbers.
Enjoy the issue.
