New York City’s Commercial Real Estate Market Amidst Crisis

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New York City’s Commercial Real Estate Market Amidst Crisis

Apr 27, 2023 | News | 0 comments

A recent report indicates that certain asset categories in New York City’s commercial real estate market are undergoing a price reduction, similar to the levels recorded in 2009. Despite this, the report suggests that this presents a unique opportunity for investors to take advantage of properties that are typically out of reach. The report characterizes this as a chance that arises once in a generation.

The report’s essence is well-captured by its title, “From Fear to Fortune,” which is fitting. Although the rest of the title may be a bit cumbersome, it provides a clearer explanation of the report’s central thesis: “General Investment Opportunities in New York City Commercial Real Estate After the COVID-19 Pandemic.” The author of the study, Chris Okada, who is also the CEO of Okada & Co., shared his research results during a recent phone interview.

Okada discussed the New York City commercial real estate market. He stated that certain property types are experiencing a significant devaluation. For example, a building on Fifth Avenue owned by Silverstein, the developer of the World Trade Center, was sold for $400 per square foot after being held by the previous owner for 20 to 30 years. Okada estimated that in the pre-pandemic market’s peak, the property could have fetched approximately $800 to $900 per foot, and the land was traded for $600 to $700 per foot.

Okada believes that the current crisis is not as disastrous as the 2008-09 Global Financial Crisis and that homeowners will be protected unlike during the subprime mortgage crisis. He attributes the decline in valuations to interest rate adjustments and predicts rates will decrease over the next three years. However, the FDIC’s involvement in the current situation raises questions about the value of mortgages on balance sheets.

Despite the challenges the office market faces, Chris Okada believes that a “perfect storm” situation can present opportunities for astute investors. Okada, who has over two decades of experience in the commercial real estate sector in New York City, sees market conditions similar to those seen during the 2008 financial crisis. He is optimistic that the present scenario offers a unique chance for investors to take advantage of the current conditions and make profitable investments in the commercial real estate market.