Stuart Elliott on What to Fear in Real Estate This Fall

Welcome back! 

Hopefully you had a great summer and were able to vacation somewhere on the planet that wasn’t 120 degrees in the shade. 

I’m excited about the fall, but also nervous.  

There’s less talk about a recession, but autumn is also a time of stock market curveballs (that’s when the Great Recession and Black Monday were thrown at us). 

Let’s hope we aren’t looking at the same unpleasantness this year. There are already a lot of big questions for real estate:  

Will the post-Labor Day return to office finally pan out? 

Probably not, which still leaves existential questions about our downtowns. There’s still lots of office space to be repositioned, and a new term, “urban doom loop,” is being bandied about.  

Will “Red October” slam the multifamily market?  

Second to office in terms of distress is the multifamily sector. Lots of investors bought rental buildings in recent years. But those investors weren’t counting on rising interest rates when they took out floating-rate loans. Cue what some are calling “Red October,” with nearly $8 billion in multifamily loans coming due in October and November. This is expected to drive a wave of distress.  

Will the residential market malaise end?  

We seem to be stuck in a low-inventory, low-sales environment. There’s not a ton going on, which is bad for brokerages and broker commissions. That tepid demand doesn’t inspire developers to build new projects either. With interest rates remaining high, who knows when that will change?

The outlier is the jet-setting global wealthy, the 1 percent of the 1 percent, who are immune to market forces and can pay cash whether they’re buying a Four Seasons-branded condo in Miami, Austin, New York or London.  

Of course, underlying all of this — determining the fate of the office, multifamily and residential markets — is the availability of money. Our big story package in this issue looks at financing from all angles amid a situation of lending being very much in limbo.  

Our ranking of the biggest lenders over the past year in New York City shows a sharp drop-off from the year before in how much was doled out to borrowers.

Reporter Isabella Farr also takes a look at Arbor Realty Trust, the best-known publicly traded lender skewed toward multifamily. As rates have risen over the past year, Arbor has become exposed to borrowers that are struggling to pay off these loans.

It’s not all bad news. Despite the “doom loop” discussion about San Francisco’s downtown, the residential market in the Bay Area’s nicer neighborhoods appears to have hit bottom and is rebounding. Prices dropped enough that brokers are now seeing bidding wars (that’s right, bidding wars). San Francisco is often a canary in the coal mine nationally — perhaps it’s a harbinger of what’s ahead for other cities. We also have our annual ranking of San Francisco’s top residential brokers.

Still, whether our big cities will support enough development to address housing shortages remains to be seen. The NIMBY versus YIMBY battle is playing out in Los Angeles, and the NIMBYs seem to be winning, at least for the moment. (And also don’t miss our L.A. Forum on Sept. 21, where we’ll dive deeper into the issue.)

It was only a few years ago that retail (not office) was the bête noire of the industry, where thanks to the rise of online retail, brick and mortar stores were expected to go extinct. Not so much anymore. In this issue’s Closing interview, we sit down with famed retailer Mickey Drexler, who’s back in startup mode. If you lift the curtain on an iconic retailer — the Gap, Old Navy, J. Crew — more likely than not, you’ll find Drexler has been there, playing the Wizard. 

Finally, a personnel note: This month marks the departure of our SVP of Content, Hiten Samtani, who has been with The Real Deal for more than 10 years and knows our DNA as well as anyone. A better creative partner I could not have had. Fortunately, he’ll still be collaborating with us on future projects.  

Enjoy the issue.