NEW YORK | One Vanderbilt | 1,401 FT | 58 FLOORS

[excel]

I can't get over how exciting the next 5 years will be for construction in NYC. Requires at least one visit a year for me

[BrownTown]

Originally Posted by excel

I can't get over how exciting the next 5 years will be for construction in NYC. Requires at least one visit a year for me

The current pace of construction is unsustainable. We're very likely to see a recession in the next 5 years which will slam the breaks on these projects that haven't started yet when it hits. Unfortunately the economic boom we're experiencing now isn't going to last forever.

[NYguy]

Originally Posted by BrownTown

The current pace of construction is unsustainable. We're very likely to see a recession in the next 5 years which will slam the breaks on these projects that haven't started yet when it hits. Unfortunately the economic boom we're experiencing now isn't going to last forever.

The pace of new office construction has more to do with New York's lack of new product and lease expirations. I do expect a slowdown in construction at some point, but New York's outdated stock isn't getting any younger. Those looking for large footprints or consolidations into single, modern office towers would likely continue. This particular tower is the rare "boutique" office tower, looking for top of the line tenants who won't need the massive space like the big boys. But the biggest threat to continued development is lack of development space. Hudson Yards is building out rapidly, faster than City projections. That's why I'm glad the Midtown East rezoning is moving forward as planned. This tower is the poster child for what can be done to breathe new life into Mew York's older business districts.

Anyway, it may seem like an extraordinary amont of new construction, but whrn we compare it overall, it's a relatively small amount of turnover. A decade from now they'll still be talking about shortage of space.

[Zapatan]

Yea I agree, NYC is a metro area of 20+ million people and the de facto epicenter of the world. The city is also like Hong Kong in the sense that it's extremely difficult to build out so therefore skyscrapers are necessary. While the current boom is something the city has never witnessed before, I'd say for the foreseeable future we'll keep seeing new projects pop up.

[NYguy]

I say just enjoy it, forever how long it lasts.

[BrownTown]

You guys do know interest rates are going up again next month and expected to keep going up right? The days of cheap money to finance these projects is rapidly coming to an end.

[skyscraper]

Originally Posted by BrownTown

Unfortunately the economic boom we're experiencing now isn't going to last forever.

YES IT WILL!!! YES IT WILL!!! LALALALALALALALA I'M NOT LISTENING TO YOU!!!!! <covers ears and runs away sobbing>

[NYguy]

Originally Posted by BrownTown

You guys do know interest rates are going up again next month and expected to keep going up right? The days of cheap money to finance these projects is rapidly coming to an end.

Has nothing to do with New York's need for new office space. The towers under construction now will run out of space, or at least the space needed for companies that look to sign the mega leases. It's the sole reason for Hudson Yards, and now Midtown East. Signed leases are what get these towers financed in New York.

[Submariner]

Originally Posted by NYguy

Has nothing to do with New York's need for new office space. The towers under construction now will run out of space, or at least the space needed for companies that look to sign the mega leases. It's the sole reason for Hudson Yards, and now Midtown East. Signed leases are what get these towers financed in New York.

How is the Midtown east proposal going?

[NYguy]

Originally Posted by Submariner

How is the Midtown east proposal going?

As they say, "swimmingly"...


http://rew-online.com/2017/05/05/a-p...-east-midtown/

A POSITIVE STEP FORWARD FOR EAST MIDTOWN

[BrownTown]

Originally Posted by NYguy

Has nothing to do with New York's need for new office space. The towers under construction now will run out of space, or at least the space needed for companies that look to sign the mega leases. It's the sole reason for Hudson Yards, and now Midtown East. Signed leases are what get these towers financed in New York.

Do you not understand how this works? Higher interest rates mean the cost to build these projects increases. Increased cost to build means increased cost per square foot to rent. Increased cost per square foot to rent makes them less competitive. It's basic Econ 101; when price goes up the amount demanded goes down.

[ChargerCarl]

Originally Posted by BrownTown

Do you not understand how this works? Higher interest rates mean the cost to build these projects increases. Increased cost to build means increased cost per square foot to rent. Increased cost per square foot to rent makes them less competitive. It's basic Econ 101; when price goes up the amount demanded goes down.

I'm not sure this is right because interest rates are also a price: the price of credit.

You need to know why rates rise or fall before you can use them as causal explanations.

For example, rates could rise because of an increase in the demand for credit because we have a booming economy, which would naturally co-exist with an increase in demand for office space.

[NYguy]

Originally Posted by BrownTown

Do you not understand how this works? Higher interest rates mean the cost to build these projects increases. Increased cost to build means increased cost per square foot to rent. Increased cost per square foot to rent makes them less competitive. It's basic Econ 101; when price goes up the amount demanded goes down.

And like I told you, it's not a factor in New York's lack of office space. These towers aren't being built because they're CHEAP to build, or because they are cute. They are being built because the city has lagged behind on new office construction, and its supply catching up (or trying to). New construction is happening because the companies that can and need to be in these types of buildings aren't going to wait a few more years and resign another lease in already aged buildings that aren't getting any younger. And finally, all you really need to know about this one is that it is under construction. Whatever nightmare scenario you may have about future construction is yours to have. I'm not interested, so save it.

[BrownTown]

Originally Posted by ChargerCarl

For example, rates could rise because of an increase in the demand for credit because we have a booming economy, which would naturally co-exist with an increase in demand for office space.

Rates are rising because the Federal Reserve bank is raising them due to there being no slack in the labor market and the desire to contain inflation. Again, this is basic Economics and the the Federal Reserve is trying specifically to stop projects like the ones in NYC from going forward to avoid real estate bubbles created by cheap money.

[jsbrook]

Originally Posted by BrownTown

Rates are rising because the Federal Reserve bank is raising them due to there being no slack in the labor market and the desire to contain inflation. Again, this is basic Economics and the the Federal Reserve is trying specifically to stop projects like the ones in NYC from going forward to avoid real estate bubbles created by cheap money.

Rates certainly impact construction to some degree, even in Manhattan where demand is strong. But economists have considered the New York market with its very strong demand and the relatively modest and gradual interest rate increases that have happened and are planned by the Fed. And have not projected any dramatic slowdown in construction.

Also, there are countervailing aspects to increases.Higher rates can also attract more foreign investors in all types of assets, including real estate. It's happened before.

[ChargerCarl]

Originally Posted by BrownTown

Rates are rising because the Federal Reserve bank is raising them due to there being no slack in the labor market and the desire to contain inflation. Again, this is basic Economics and the the Federal Reserve is trying specifically to stop projects like the ones in NYC from going forward to avoid real estate bubbles created by cheap money.

I don't want to derail this thread but this is a fundamental misunderstanding of monetary policy. The FED doesn't really "set" rates, it goes where the market tells it to go.

The Fed is trying to hit the theoretical walrasian equilibrium rate, where desired savings = planned investment. What matters is where that equilibrium rate is.

[NYguy]

Blah, blah, blah. Let's just watch the construction and enjoy it people.



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https://www.instagram.com/p/BT9fI3XB...ken-by=jcd.nyc

[De Minimis NY]

I hate to feed the fire on this interest rate discussion, but I feel like I should point out that interest rates correlate positively with cap rates (i.e., as borrowing costs increase, land costs decrease).

Understanding how macro factors influence the feasibility of development is a much more complex task than some suggest. Borrowing costs (like land costs) are just one of MANY factors that need to be taken into account.

If you want evidence of this, look back to the commercial real estate boom of the mid-1980’s, which took place at a time when mortgage rates exceeded 15%. Or look at what’s happening right now, with land prices today at historic levels, pushing the cost of delivering new product to historic levels (despite the low interest rate environment), and yet the city is booming with development.

NYGuy is correct; at the end of the day, if the demand is there (anchor tenants), it will get built.

[NYguy]

Let's just leave it at that. It's a discussion that can be had in a proper thread.

[NYguy]

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