NYC Brokers Stay Positive During Office Wait-and-See

New York City skyline. Image by ben o’bro via unsplash.com

Real estate brokers’ faith’ in the real estate market continues to wane, yet their attitude has not crossed the line into a state of negativity, according to the Real Estate Board of New York’s Q1 2022 Real Estate Broker Confidence Index.

Confidence among participating brokers in both commercial and residential real estate declined for a third-consecutive quarter, and their six-month outlook was less optimistic, as well. Still, positivity abounds.

The Commercial Current Confidence Index remained somewhat flat, dropping from 17.89 the previous quarter to 17.05. For the first time since COVID-19 appeared, the pandemic was not the main reason for the drop in the index.

The disruption brought to the city since the onset of the pandemic was very real, according to prepared remarks by Brian Waterman, executive vice chairman & principal at Newmark, who added that New York City was able to quickly adapt to the new ways in which people work and the way they envision commercial space.

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Commercial brokers pointed to a delayed return to office and quality-of-life issues as their leading concerns in the first quarter. This is a factor that could change in the second quarter, as in April, the return-to-office movement was just beginning to show momentum, following a series of several office reopening announcements from major employers in March. As of late March, office occupancy in the metro New York region had reached 37.1 percent, compared to 22 percent in January, according to Kastle Systems.

In terms of the six-month outlook, the Commercial EXI dipped from 38.88 in the fourth quarter of 2021 to 21.51 in the first quarter of 2022. Brokers attributed the approximately 17-point decline in expectations to a pessimistic view of financing for the upcoming six months.

The Residential CCI declined quarter-over-quarter from 50.63 to 31.41, and the six-month EXI dropped 20 percent from 42.85 to 22.98, hitting its lowest mark since 2020. Yet, broker confidence remained high, despite being moderated by the challenges of rising interest rates and inflation.

Solutions are at hand

Brokers who responded to the survey believe that addressing a handful of core issues will go a long way toward bolstering the economy and furthering the success of the real estate market in New York City in 2022. For starters, authorities must find a solution to quality-of-life issues, including crime, sanitation management and transit safety. Additionally, local government and incentives that support business are a necessity, as are the containment of inflation and the offsetting of financing costs. And finally, there must be a more extensive and prolonged return to the office.

The main challenges facing the brokerage community have thankfully shifted away from unprecedented public health concerns, Keith DeCoster, director of market data and policy with the Real Estate Board of New York, said in prepared remarks. He added that economic momentum and broker confidence should stay in positive territory, particularly if public policymakers continue to prioritize quality-of-life issues and empower owners and businesses to invest further in New York City.

Read the full report by REBNY.