NYC I-sales players concerned about Trump’s potential impact on foreign investment

Brokers are optimistic on the pro-business prez, but worry about state of int'l relations

Nov.November 21, 2016 07:00 AM

Even before Election Day threw global and domestic markets into disarray, New York City’s investment sales market was having a volatile year. Deal and dollar volumes sunk, but price per square foot rates continued to climb.

Most investment sales brokers interviewed by The Real Deal expressed optimism that Donald Trump’s presidency will stabilize the local investment sales market — they expect that Trump will implement significant tax cuts and ramp up infrastructure spending.

Still, major concerns remain. There’s a fear that the president-elect’s position on foreign policy and trade could cause overseas investors to pull back on commercial real estate purchases in New York.

According to a Cushman & Wakefield TRData LogoTINY report last month, New York City surpassed London as the top city for global commercial real estate investment. The report noted that London was lapped by New York largely due to prices and the uncertainty caused by the Brexit. But the global economic landscape has changed dramatically in the last two weeks, and the core issues that caused London to slip could very well appear stateside in the United States’ most prosperous city.

Bob Knakal, the chair of New York investment sales at Cushman & Wakefield wondered if the Trump administration could renegotiate key trade agreements without antagonizing foreign governments.

“It has to be done in a way so those countries don’t restrict flow of capital out of their country and into ours,” he said. “They could make firms curtail capital or overall make it more difficult to invest.”

The nations and emirates that spend the most on Manhattan commercial real estate include Qatar, Abu Dhabi, China and Japan. Trump’s statements on immigration and Sharia law have already caused tremendous controversy abroad and at home, throwing into question the future of business relationships between investors in the Middle East and the U.S.

But it’s his relationship with China — whom he accuses of currency manipulation and job stealing — that will likely be even more closely watched in New York.

From 2010 to 2015, Chinese firms invested $300 billion in U.S. real estate, including $17 billion in U.S. commercial properties, according to a report in May from Rosen Consulting Group and the Asia Society.

Woody Heller, head of capital markets at Savills Studley, echoed Knakal, saying the “passporting” issue is similar to the one facing Britain in the wake of the Brexit vote. Global banks are expected to lose their rights to provide services in the European Union after Brexit. Trump’s potential exit from various trade groups could spur limitations over investing in U.S. assets.

“If the administration starts deporting people, offshore folks may be cautious about continuing to invest here,” Heller said.

Meridian Capital Group’s David Schechtman countered that with Trump’s track record with relationships overseas as a developer. He’s had business ventures in Qatar and the United Arab Emirates.

“The president-elect has done business in so many countries and citizens there,” Schechtman said. “His personal style is something people have come to expect and won’t alienate nation-states. It might do the opposite.”

Given Trump’s pro-business platform, brokers are confident that banks will become more flexible lenders during his term. Ariel Property Advisors founder Shimon Shkury assumes he’ll be less restrictive on banks and other lenders.

“If he is who we think he is, he’ll be more liberal with the banking system,” Shkury said.

Others are looking ahead to the ripple effect of tax policy that favors business – devoid of capital-gains tax increase – which could take about six months to spur growth in the investment sales space and other real estate markets.

“You get optimistic pretty quickly when you realize you’ll be able to save money next year,” said HFF’s Eric Anton.

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