Today, I am finishing up my 3 part series on the good, bad, and future of New York real estate. The look-ahead is tough, I won’t lie. I look at this as an adjustment period. It is just a very weird time. I don’t know another way to describe it. New York, and the world in general, is morphing into the next iteration of whatever it will be. Right now, everything is messy and disjointed, as is customary when going through a rebirth or change.
So many things don’t add up right now, and it’s no wonder that most people I speak to are confused and bewildered. On paper, the economy is booming, unemployment is at historic lows, and inflation is staying in check – but as a city and a country, there is a deep sense of uncertainty and agitation. Typically, economic prosperity leads to a general feeling of consumer confidence and positivity about our country and where it’s heading. This time it doesn’t. The wealth gap is a very real issue, but the fear-mongering, culture wars, and press-generated drama are bringing us to a boiling point. 2024 will be a roller-coaster for the record books.
All this drama – real and created – will undoubtedly impact the New York City real estate market. Below are a few themes that we should watch.
Scant Inventory:
I wrote about this issue before, but it is still very real for all New Yorkers and is only getting worse. There is almost zero middle-class housing in New York. This is a significant problem that needs to be addressed sooner rather than later. We need someone with vision and chutzpah to deal with this head-on—someone with no personal or political agenda. Manhattan is quickly becoming a mecca for the very rich or the very poor, which is neither sustainable nor desirable.
Also, a lack of liquidity and an unfriendly business environment have led developers to move on from New York, worsening the problem. As for the available inventory, it follows the good, bad, or ugly categories. Yes, there are some excellent, well-priced apartments to find. However, there are A LOT of overpriced, poorly designed messes. In the past few months, the list of developers who have called me to tour their buildings and give them suggestions on how to sell their remaining units is long.
Even though agents are the first group to get blamed and axed when a building doesn’t sell – a large part of a failed project is created before a shovel hits the dirt. Typically, it comes down to three things. The first one, and the one I have seen the most often as of late, is that they built the wrong product for the location. This is a product of bad new development planning. Developers need to stop designing by committee or taking advice from people who have either never sold an apartment or have no idea who is currently buying. Designing the right product only takes a handful of very smart and experienced people. And once the building is built, it’s difficult and often impossible to fix unless you slash the price. This has been a recurring conversation with developers this past year. The second issue would be dumb design driven by ego.
No one wants a living room shaped like a triangle or a primary bedroom that can barely fit a bed but with walk-in closets that could fit a boat. Again, this is a pre-dev issue, and it’s hard to fix once it is built. Finally, and one that’s easier to fix, is the branding and marketing. Bad branding haunts me because it seems to be everywhere. Bad messaging, along with agents who act like clowns, are distracting to buyers. The best marketing and selling should feel seamless and effortless.
Office Buildings:
This is going to be very interesting. Class A office buildings are performing well and picking up more steam, and very cheap leases in Class C buildings are showing signs of recovery, but the Class B office buildings are on the struggle bus. I don’t know how they survive without intervention or reinvention. Once again, the middle of the market is suffering. People are signing leases in either prime, next-generation, or ultra-cheap discounted buildings. (This seems to be a recurring theme). There have been many creative suggestions that could solve this problem, and I’m confident that capitalism, not altruism, will ultimately save the day here. Problems create opportunities, and a handful of smart, creative, and well-financed people will exploit this opportunity.
Election Year:
Every presidential election year causes the market to pause. The last few election cycles have caused the market to more than pause. It has come to a standstill. This year, I anticipate being far worse than previous years because of unprecedented uncertainty. We have no idea what is going to happen. I feel like I still have PTSD from the last two elections. I am not ready for this one yet – but here we are. When faced with uncertainty, people react in one of two ways. Some might decide that now is not the time to buy anything or move anywhere new, just waiting for the storm to pass. Others will feel that the time for action is before all hell breaks loose.
So, another year passed, and once again, it was unlike any other we’ve witnessed. The one thing we can always be sure of is change. I’m truly grateful that I have the opportunity to be surrounded by people who inspire me and help me in my quest to become a little better each day.
Side Bar:
Two of the most important decisions we make throughout the year are who we surround ourselves with and what we read. We become like the people we surround ourselves with and are what we read. Ryan Holiday taught me a golden rule: you should take 100 pages, subtract your age, and if you get to that page number and you’re not enjoying or benefiting from the book, close it and start on another one. Thanks to my sources, I love this concept but haven’t needed to use it once this past year. About 80% of the books I read have been referred to me by a handful of people. Bill Gates. Ryan Holliday. Barak Obama, and my wife. I read more than 50 incredible books over the past year, and here are the ten best books I read in 2023.
1. “The Creative Act – A Way of Being” – Rick Rubin
2. “The Coming Wave: Technology, Power, and the Twenty-First Century’s Greatest Dilemma” – Mustafa Suleyman
3. “And There Was Light, Abraham Lincoln and the American Struggle” – Jon Meacham
4. “Empire of the Summer Moon” – S.C. Gwynn
5. “The Escape Artist: The Man Who Broke Out of Auschwitz to Warn the World” – Jonathan Freedland
6. “Saxophone Colossus: The Life and Music of Sonny Rollins” – Aidan Levy
7. The Mysterious Case of Rudolf Diesel; Genius, Power, and Deception on the Eve of World War 1” – Douglas Brunt
8. Nobody Wants To Read Your Sh*t: Why That Is And What You Can Do About it” – Steven Pressfield
9. “The Island at the Center of the World: The Epic Story of Dutch Manhattan and the Forgotten Colony That Shaped America” – Russell Shorto
10. “The Signature of All Things” – Elizabeth Gilbert
Let’s do this.
Shaun