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
Search and seizure: oligarch edition
Search and seizure: oligarch edition
Search and seizure: oligarch edition
Here’s where wealthy Russians have owned trophy real estate in the US
Here’s where wealthy Russians have owned trophy real estate in the US
Here’s where wealthy Russians have owned trophy real estate in the US
Watch: Breaking down the Ukraine invasion’s impact on US real estate
Watch: Breaking down the Ukraine invasion’s impact on US real estate
Watch: Breaking down the Ukraine invasion’s impact on US real estate
Vladimir Putin (Getty/Illustration by Kevin Rebong for The Real Deal)
Ukraine invasion sends shock waves to Miami, NY real estate
Ukraine invasion sends shock waves to Miami, NY real estate
Maja Procz, global head of transactions, Commerz Real (Commerz Real, LoopNet)
CRE foreign investment roared back in 2021— with a few focus shifts
CRE foreign investment roared back in 2021— with a few focus shifts
Rudin’s 3 Times Square inks massive lease with university
Rudin’s 3 Times Square inks massive lease with university
Rudin’s 3 Times Square inks massive lease with university
(iStock/Illustration by Kevin Rebong for The Real Deal)
“Brace yourselves”: Residential agents prepare for return of foreign buyers
“Brace yourselves”: Residential agents prepare for return of foreign buyers
First we take Manhattan: Inside Reuben Brothers’ NYC shopping spree
First we take Manhattan: Inside Reuben Brothers’ NYC shopping spree
First we take Manhattan: Inside Reuben Brothers’ NYC shopping spree
arrow_forward_ios

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

Loading...