CRE execs see Trump, interest rates as big risks for 2017

“Offshore capital is saving the core and core-plus markets,” says NGKF's Kuhn

New York /
Jan.January 10, 2017 05:20 PM

When the Urban Land Institute’s New York division gathered a year ago to give its outlook for the real estate market in 2016, fears over the Chinese economy and global markets dominated. Now, a year later, the outlook has reversed. Industry leaders now fear instability from within the U.S., and see foreign capital as a stabilizing force.

The key sources of uncertainty: rising interest rates and the next president.

“I think the offshore capital is saving the core and core-plus markets,” said James Kuhn, president of Newmark Grubb Knight Frank TRData LogoTINY. He argued that the prospect of rising interest rates in the U.S. has been putting upward pressure on record low cap rates on the lowest end, and that prices for trophy properties would be falling more rapidly if it weren’t for foreign investors still buying them up.

Lauren Hochfelder Silverman, head of the Americas at Morgan Stanley Real Estate Investing, said her company is “looking for places where we can get (net operating income) growth that can outpace what we believe will be several rate hikes in the next couple of years.” She also said she hopes the Federal Reserve “doesn’t get ahead of us” in raising rates too quickly.

Peter Riguardi, JLL’s tri-state president, was more optimistic than Kuhn, arguing that “the modest increase in rates isn’t scaring anyone” and that cap rates have already corrected upwards. But he said he has noticed a decline in demand for office space.

Interest rates aside, the panelists also pointed to Donald Trump as another major source of uncertainty.

“My biggest concern, respectfully, is Trump,” Riguardi said, arguing that the actions of an unproven president could unsettle markets.

Bill Rudin, CEO of Rudin Management Company, said it’s too early to tell how the new administration will impact the real estate market, but he indicated big changes could be in store.

“We’re in a totally different world with the election and tax reform,” Rudin said.


Related Articles

arrow_forward_ios
The Internal Revenue Service is going after foreign real estate investors as part of a broader sweep to collect revenues amid the pandemic.  (iStock)

“There’s a lot of money to be made”: IRS targets foreign real estate investors

“There’s a lot of money to be made”: IRS targets foreign real estate investors
Charles Rettig, Commissioner of the IRS (Getty)

Opportunity Zone rule change seeks to entice foreign investors

Opportunity Zone rule change seeks to entice foreign investors
 The Qualtrics Tower at 1201 2nd Avenue in Seattle with Hana Financial CEO Kim Jung-tai and Skanska USA CEO Richard Kennedy (Google Maps)

$700M Seattle office tower buy would be among largest Covid-era property deals

$700M Seattle office tower buy would be among largest Covid-era property deals
The coronavirus has been crushing global real estate investment for months, but there are a couple of sectors weathering the storm (iStock)

Here’s how much Covid has crushed global RE investment

Here’s how much Covid has crushed global RE investment
The Real Deal's Hiten Samtani and Rudin Management CEO Bill Rudin

The REInterview: Bill Rudin on remote work, property taxes and the future of tech leasing in NYC

The REInterview: Bill Rudin on remote work, property taxes and the future of tech leasing in NYC
“5 years ago, people would say, what’s a TikTok?” Bill Rudin on why NYC’s office market may be more resilient than you think

“5 years ago, people would say, what’s a TikTok?” Bill Rudin on why NYC’s office market may be more resilient than you think

“5 years ago, people would say, what’s a TikTok?” Bill Rudin on why NYC’s office market may be more resilient than you think
Stagnant water in office buildings may pose risk to returning workers (iStock; CDC)

Empty office buildings may give rise to other health risks

Empty office buildings may give rise to other health risks
Global private real estate investment continues to fall as the coronavirus continues to force economics to a standstill. (Credit: iStock)

Private real estate investment deals tumble worldwide

Private real estate investment deals tumble worldwide
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...