One of the many questions I am asked these days in regards to the commercial real estate market is; “Al, do you think there’s a bubble?” One of the many reasons for this question is the current record breaking sales prices of buildings specifically in New York City. Prices will always break records every few years no matter what cycle the economy is going through simply because smart sellers won’t let go of a property for less than what they paid for it and there are many smart sellers in todays’ market.
This is not to say a bubble can’t happen. Let’s take a look at the pre-Lehman era; the government tried to increase the home-ownership rate in order to attract scientists, doctors and engineers from other countries. Attempting to increase this rate was a great idea but the implementation of this plan went sour because banks were able to be reckless and loaned money to almost anyone who applied regardless of the borrowers (in)ability to pay back the loan. That said, buyers in todays’ market for the most part are not new or first time buyers.
Todays’ buyers are mostly experienced, established, and affluent New York families and developers. Most New York families are not sellers. They buy buildings, hold on to them, and pass them up to their children and their children continue this cycle. When you look back at prices say 50 years ago, you’d say they’ve made a smart buy then and you look forward to what prices may look like 50 years from today, you’d probably say the same.
Smart building owners don’t get worried, nervous, or have any negative thoughts no matter what the market goes through. Smart building owners think only positive, detach their emotions from their assets, have faith in America and in New York City and know that our nation and our city will always prosper.
Alex S. Isak
Director of Sales | Upper West Side
Goldenwood Property Advisors, Inc.