Greener Pastures Ahead for NYC

“Looking in the rearview mirror, we’re leaving a disaster zone,” Shimon Shkury, president & founder of Ariel Property Advisors, said in his opening remarks at the company’s bi-annual Coffee & Cap Rates discussion. Yet, he noted, there are certainly greener pastures ahead.

New York City is poised, in my respects, to do well. Shkury noted that while there were difficulties to 2023, elements such as increased tourism, job growth and subway ridership paint a positive story for the year ahead in the city.

Of course, there are headwinds. Of them, he noted geopolitical risks, mortgage maturities, difficult housing policy and an election year. The tailwinds, however, could outweigh these hurdles. Shkury said that an abundance of capital, the impact of mortgage maturities on pricing discovery, strong overall fundamentals, policy promises and affordable housing initiatives are among the list of pros.

NYC’s road to stability

Last year, transaction volume in New York City dropped 29 percent when compared to 2022, according to Ariel’s 2023 year-end report. This marks the lowest amount of activity the market has experienced in the last decade. But there are bright spots. Shkury noted that office occupancy rates rose 10 percent year-over-year in 2023.

For office, there is value to be found among Class A properties, according to Shkury. Further, more companies are making “offices their homes” and investing into large areas to sustain and grow workforces. For example, MetLife signed a lease extension at 200 Park Avenue, where the company will maintain its headquarters through 2038. Also, Fisher Brothers committed to a 765,000-square-foot agreement in Midtown Manhattan.

And even where there are office challenges, Shkury said that there is value to be found in the makeover of office spaces.

Retail, too, is finding its footing. The property type has continued to show resiliency and adaptability throughout the city following the pandemic. Many brands are demonstrating they want to be located in prime locations throughout the city and are signing massive leases.

Throughout 2024, Shkury is expecting to see growth in New York City. More transactions, he anticipates, will take place in the latter half of the year while overall prices should see some stabilization.