2019 marked a year of policy reset with respect to New York City residential pricing. Markets were reacting to an increase in mansion and transfer taxes, the relatively new $10,000 SALT deduction cap passed in late 2017, and a decrease in foreign demand. Some of the top stories I paid attention to include:
-WeWork plunged from a $47bn with an imminent IPO to a current valuation closer to $5bn. I'm still bullish on prebuilt spaces that are turnkey but the market determined that WeWork has acted more as a real estate company that subleases space rather than a technology firm.
-The passage of the Housing Stability and Tenant Protection Act of 2019 wrought havoc on the multifamily market and is dissuading Owners of buildings from renovating rent stabilized apartments. We're already seeing strong rent increases for market rate apartments as the supply fails to keep up with demand. I predict this upward rental pressure will continue which should further incentivize market-rate-paying Tenants to consider buying a home if they plan to live in New York through the better part of this decade.
-Amazon pulled out of its plans to establish a Headquarters in Long Island City that would have created 25,000 jobs. Rep. Alexandria Ocasio-Cortez and State Senator Michael Gianaris spoke out strongly against the deal and felt it was unfair for Amazon to be the beneficiary of tax benefits worth $3.4bn. Recently Amazon went for a smaller footprint of 335,000sf of space in Hudson Yards that will be home to 1,500 jobs without subsidies in place.
-The stock market rode high with the S&P 500 delivering a gain of more than 28% in 2019. Mortgage rates have continued to fall with the average U.S. fixed rate for 30-year mortgage currently at 3.64%. These are two data points that make it an opportune time to diversify a portfolio through ownership of a home or investment property in what has been a softer Manhattan real estate market.
-FAANG stocks have been one of the drivers of our bull market. Fortunately Facebook, Amazon, Apple, Netflix, and Google are actively expanding around New York City - nearly 9m sf of commercial space total will be leased amongst them which is a positive indicator for job growth and housing prices in New York.
See below for the complete analysis in how we wrapped up Q4 2019.