Editor’s note: Globalization on trial

The world is getting smaller, and not in a good way.

For a while now, the U.S. has been divided between well-educated, diverse cities that have benefited from the global economy and less educated regions in the heartland where the manufacturing base has shrunk and there’s been no upside from globalization.

But now, that flyover country seems to be battling back. Calls for closed borders, renegotiated trade agreements and increased nationalism seem to be gaining some traction, with globalization as the enemy. This was highlighted by the recent Brexit vote, where similar socio-economic forces were at play, with citizens of the United Kingdom making the jarring and historic decision to leave the European Union.

These trends could have big implications for real estate.

In the short term, when it comes to the New York City market, London’s loss could actually be our gain. Reporter E.B. Solomont writes that “with European markets freefalling in the wake of the vote, the value of the pound dropping, and the political landscape in the United Kingdom in disarray,” London real estate seems like less of a haven for foreign real estate investment. Brokers are already reporting a discernible shift away from our chief rival city to New York instead. See page 20.

Longer-term, though, a future U.S. that is more “closed, collective, protective and segmented” as New York Times columnist David Brooks recently wrote, seems one possible outcome of the presidential race. And that could be a big detriment to New York properties. After all, what’s more international than the city’s real estate market? So many of the players and so much of the money comes from abroad, and New York real estate essentially functions as a safety deposit box for the world.

Donald Trump — who was threatening to withdraw from NAFTA and impose punitive tariffs on Chinese goods late last month — could stymie the global flow of capital (not to mention the global flow of people) if he enacted his populist platform as president. And Hillary Clinton’s rhetoric as of late has increasingly revolved around restructuring the American economy to help the middle class, which makes sense but likely could involve a shift away from the globalization that benefits New York real estate too.

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While Brexit could spark a crisis in Europe with global repercussions, the cycle of economic expansion in the U.S. hit the seven-year mark last month — making it quite long in the tooth.

That’s part of the backdrop for our cover package on New York City’s retail market by reporters Konrad Putzier and Rich Bockmann. While much attention has been focused on a correction in the luxury residential market, the retail scene also appears to be in a tenuous place, according to observers. See page 44.

Lending, too, is a tricky proposition these days. Due to the latest shifts in the market as well as high land prices and construction costs, developers are being forced to change how they approach ground-up projects in terms of the capital they rely on, as reporter Kathryn Brenzel writes. That includes assembling increasingly complex capital stacks and even borrowing money from other developers. See page 56.

But not everyone is slowing down. We take a look at developer Ben Shaoul in a profile on page 36. The 39-year-old head of Magnum Real Estate Group got his start as a hard-driving landlord of rent-regulated buildings, earning him the nickname “Sledgehammer Shaoul.” He’s now targeting luxury condos and has become one of the busiest developers in Manhattan. Check out the story by Katherine Clarke.

Also of considerable significance in this issue is the first-ever ranking of the 20 biggest rental landlords in the city. Such a ranking might not seem that complex, but owing to obtuse city records and LLCs that often shield the “true owner” of a building, not even the city government had such a list. Through our research team, we knitted together various databases to track ownership in a way that hadn’t been done before and analyzed other key metrics like net operating income and property taxes. See page 30.

Finally, along with this issue you’ll find our 76-page Hamptons Market Report, our second annual edition focusing on all things East End. Some of the biggest issues facing that market today also involve politics, albeit not on a global scale since foreigners are less of a presence out east. And new development in the Hamptons is always a source of contention, as are new nightlife venues. We dig deep into both subjects, as well as explore battles over Airbnb that threaten the area’s broader rental market.

Enjoy the summer and enjoy the issue.