What keeps the normally contented titans of Manhattan building-buying up at night, watching CNBC retreads and quaffing vintage port?
Nightmares of a Hillary Clinton or a John Edwards smiling broadly on the Capitol steps, hand on Bible, intoning, “I do solemnly swear that I will faithfully execute …. ”
The titans usually spring awake before the cessation of the Presidential oath.
Uncertainty over control of the federal government after 2008 is the only thing that could slow the mighty Manhattan investment-sales market. Everything else? Boffo!
A strong local economy, a lot of foreign money against a weak dollar, high office rents, high apartment rents, etc., render investing in property here catnip to buyers the world over.
But, as the Presidential election grinds on, property buyers and sellers may start to hold back, wary of dealing until a clearer sign emerges of whom will be deciding tax policy, including the beloved 1031 exchange, which protects buyers and sellers from taxes if profit gained from a deal is sunk into other property fairly fast.
Otherwise, the enormous chugging engine that is the building and portfolio sales market will continue to rumble toward records.
Investment-sales deals worth more than $27.2 billion closed in Manhattan in the first five and a half months of 2007, according to Real Capital Analytics, a research firm tracking deals of at least $5 million; another $9,470,209 worth was under contract as of June 15. Should that amount close, 2007 would—warning: real-estate cliché coming—shatter the record set in 2006 of over $31.5 billion in investment sales.
Right now, in 2007, office deals lead the investment-sales market—at least $22.5 billion worth has traded, including epic deals like the $1.8 billion one for 666 Fifth Avenue and the Macklowes’ $7 billion buy of eight Blackstone buildings. Apartment deals were a distant second sector-wise ($3.37 billion), followed by hotels ($1.2 billion) and retail at (sniff, sniff) $203,500,100. All of those sectors are on pace to top 2006’s.
But after 2007, who knows?
“The thing that the market dislikes most is uncertainty,” said Robert Knakal, the chairman of Massey Knakal, an investment-sales brokerage that deals exclusively with sellers—and that, like other brokerages, is having a very good year. “If a candidate is leading in the polls, and no one’s sure the economic direction he or she is going to take, the uncertainty could lead to an income recession.”
Things won’t likely get as bad as they were in the early 1990’s, Mr. Knakal said, when a full-blown national recession dragged down the New York City economy and its beneficiaries like the investment-sales market; that was the nadir from which the market’s been rising ever since.