BY MICHAEL STOLER
As we enter the New Year, real estate and business leaders are asked to predict the events for the next 12 months. This is indeed a difficult task, especially when many unexpected events took place in 2014.
Interest rates, which were near record lows on Jan. 1, 2014 for the benchmark 10-year Treasury note, were 3.04 percent. Nevertheless, as the year ends, the 10-year is yielding 2.15 percent, far below the expectations of a year ago. Oil and natural gas energy prices have fallen by more than 50 percent aiding the consumer in their purchasing power. While these indexes are significantly lower than a year ago, prices for commercial real estate have risen to their highest levels since 2006-2007.
It was only a few years ago when developable land in the Borough of Queens could be purchased at a price between $80 to $100 per developable foot. With massive development taking place in the Borough, prices for developable land has risen to a level in excess of $225, especially if the site is zoned residential and is convenient to mass transportation. Thousands of residential units are in various stages of development in the Borough, with rents reaching for brand new residential units at close to $50 per square foot (as compared to $35 less than 18 months ago). Prices for prime residential condominiums are expected to exceed $1,100 per square foot.
With office rents rising in Manhattan, tenants are focusing their attention on the convenience and affordability to rent space in Long Island City and other neighborhoods. Convenience of mass transportation and lower pricing for hotels has aided in the significant increase in building for the hospitality sector.
Last but not least, due to the work of the former and current administrations, one of the largest affordable housing projects is being developed in Hunters Point South, Astoria and Long Island City neighborhoods.
I may not be the Amazing Kreskin, predicting the events of 2015, yet when I look at my crystal ball, things seem to continue to be bright for commercial real estate.
Michael Stoler is the managing director for Madison Realty Capital and president of New York Real Estate TV LLC. He is also the host of the Stoler Report – New York’s Business Report, which airs eight times per week on CUNY TV. The show’s 14th season debuted on Jan. 6.