This year was an uneven one for the commercial real estate market in which the volume of sales and leasing improved, but prices remained far below those seen in the boom years. In the sales arena, a number of major properties traded hands at steep discounts, but the overall volume was light. Office leasing activity improved dramatically in 2010 — 50 percent year-over-year in terms of volume — but while prices stabilized, they have not risen much from their low points. The Real Deal spoke to some of New York City’s top real estate pros — from office and retail leasing experts to investment sales specialists to real estate attorneys — to get their views on where the New York City commercial market is headed in 2011.
Here is what they had to say:
Faith Hope Consolo, chairman of retail leasing and sales division at Prudential Douglas Elliman
Where do you see retail leasing heading in 2011?
Leasing will continue its upward trajectory. Retailers have announced plans to increase the number of stores they’re opening in 2011 versus 2010. This holiday [season saw] exceptional sales gains, so fewer retailers will announce bankruptcy or retrenchment plans in January. That said, the bookstore sector will remain challenged, so we should keep a close eye on those retailers. We will see increasing globalization, with more brands looking to establish their U.S. reputation. Pop-ups will remain a great way to test concepts.
What can we expect to see in terms of leasing activity in the city?
2010 saw occupancy increase, and 2011 will be no exception. [Rents] will continue to increase, continuing a trend from 2010. We’re not quite at pre-crash levels yet, but we’re getting there.
What parts of the city do you think will draw new leases?
With many of the most famous shopping streets now re-leased, we’ll see new retailers going to the up-and-coming neighborhoods such as the High Line, the corridor between Macy’s and [the] Time Warner Center [and] underserved areas including Harlem, the Upper East Side and the outer boroughs.
Peter Kozel, chief economist at Colliers International New York
What do you expect to see in the office leasing market in 2011?
Leasing activity will remain strong in 2011, especially as companies seriously begin to contemplate expanding their employment levels by significant amounts. The vacancy rate will decline in the range of 1 to 1.5 percentage points.
Which parts of the city do you think will fare best?
Midtown north will still enjoy the strongest leasing environment. A situation in which there is a lack of leasable space may develop in the Midtown south market, holding back activity in that market. Downtown offers strong competition in the form of lower asking rents and the prospect of new construction becoming available. Its major tenants, however, will likely add space in the latter half of the year.
Adelaide Polsinelli, associate vice president of investments at Marcus & Millichap
How do you think building sales will perform in 2011?
Investors are cautiously optimistic right now and are trending toward quality assets with less perceived risk. Manhattan is considered a safe haven for domestic and international investors and will lead the rest of the regional and national commercial markets in the coming year. Financing is available for strong assets and strong borrowers. As long as this continues and strengthens, sales will be robust.
What parts of the city do you think will fare best in building sales?
Manhattan will always do better than most areas. Multi-family buildings in Queens and Brooklyn will also be strong. As the economy ekes out of the recession, we are seeing a release of pent up renter demand. This is resulting in a historically high net absorption rate which is a positive sign for multi-families.
Karen Bellantoni, executive vice president at Robert K. Futterman & Associates
What leasing trends do you anticipate in 2011?
We are going to see more international retailers entering New York for the first time with multiple locations. We are also going to see the areas with high density of tourists continuing to thrive. [And] we are going to see more restaurants opening and more large flagships for retailers that have a successful business in Manhattan.
Will rents increase or decrease?
Rents will continue to increase in prime markets and hold steady in areas where there are more vacancies.
What part of the city do you think will perform best in retail leasing?
The areas that will outperform are Times Square, Fifth Avenue in both Midtown and the Flatiron District and Soho.
Edward Mermelstein, partner at Rheem Bell & Mermelstein
How will foreign investment fare in the New York area?
It’s still going to be a slow six months going forward from January, but looking at the next year to year-and-a-half, I see a strong recovery for foreign investors looking at Class A properties in U.S. The fact that the economy is predicted to come back and there is discussion that the [gross domestic product] is growing over 3 percent, and maybe 4 percent, bodes very well, not just for pricing in terms of office rents but overall in terms of Class A properties
What trends do you predict for the real estate market in 2011?
It’s slowly starting to look like the market is getting back to normal. We’re going to need a stabilization or at least a [commercial mortgage-backed securities] market recovery in order to really start seeing what we were from 2005, but in terms of moving forward in 2011, the recovery looks like it’s starting to pick up quite a bit of steam.
Robin Abrams, executive vice president at Lansco
What do you think the retail leasing landscape will look like in 2011?
I see increased activity as retail sales pick up and tourism remains strong.
Will rents increase or decrease?
Rents are already increasing significantly in the most high-profile, Active Retail Corridors Like Broadway in Soho [and] Broadway in Times Square… In these areas, as all over the city, rents decreased by 30 to 40 percent at the bottom of the market, and are now climbing back up. Rents in the local neighborhood areas, where there are still many vacancies, have come down substantially and will level off.
Are there any other trends you think we’ll see in the coming year?
International retailers are scouting locations and many will commit to space. Many West Coast retailers are now looking to expand to the East Coast. I see many new children’s wear retailers entering the market. Home furnishing tenants are expanding in a big way, particularly into the urban areas where there were limited choices in the past. Fast retail or more affordable clothing lines are also continuing the trend. Additionally, discount retailers continue to expand as the population changes the way they shop.