Real estate continues to look like good investment

As a real estate investor, don't be fooled into now allotting significant funds in the record high stock market rather than investing in the area you know best. Not only is it wise for you to invest in where you have expertise, but the fundamental of the real estate market are superb at this time - possibly even better than the stock market. Despite record levels of the Dow Jones Industrial Average, the stock market is jittery, as evidenced by a 114 drop in the Dow on July 6, 1996, and a 200 point fluctuation of that same indicator on July 16, 1996 (New York Times, July 21, 1996)

After the very tough years in the early 90's and even a sluggish year in 1995, New York real estate of all types is proving to be a wise investment choice for 1996. Top-end condominiums are being built for luxury at considerable expense to meet market demand.

William Zeckendorf told the New York Times (July 28, 1996) that his construction organization spent a additional $3 per square foot for luxury finishes on Millennium Tower apartments (West 67th Street) indicating that buyers can and will pay extra for quality.

Post-war condo prices have increased 4.6 percent throughout Manhattan and a dramatic 44 percent in Greenwich Village, according to a Corcoran Group sponsored survey (New York Times, August 18, 1996). Condos aren't the only hot residential property. The Real Estate Board of New York reports that 632 Manhattan co-ops were sold during the second quarter of 1996 as compared to 491 for the same period in 1994. That represents a 28.7 increase!

Commercial Real Estate and Jobs

The increase in residential real estate is both a reflection of and is caused by the improvements in commercial real estate and increased business activity. Overall nationwide economic activity is positive, with low inflation and unemployment, a record number of employed, and a high (albeit sometimes jittery) stock market. Despite years of corporate downsizing, a New York Times analysis of government data indicates that in 1993 "... the percentage of new jobs that pay above-average salaries was double what is was in 1992." (July 21, 1996.)

And don't think that New York is being left out. New York office building construction underway will handle the demands of computer technology, as evidenced by the modem cable system being installed for Equitable Life Insurance at 1290 Avenue of the Americas. Even the once beleaguered office and hotel markets are improving, as indicated by the construction in progress of Renaissance Plaza, a $320 million, 32-story office and hotel complex in Brooklyn. Yes, you read correctly, office and hotel space under construction in Brooklyn. Also note that John Fox, senior vice president of PKF Consulting, reports that hotel occupancy rates have been "...at or above record levels..." during 1996, with overall rates improving from 73.9 percent last year to 77.9 percent. That is a 5.4 percent increase.

So, business travelers and tourists are coming to New York, which helps all kinds of business, including the retail trade. The big retailers are coming to New York to take advantage of the opportunity. (Maybe you should not let the retailers have all the fun). Barnes & Nobles, with its coffee bars, has taken enormous retail space on Third Avenue (East 52nd Street), East 14th Street, and Astor Place. Also Kmart, which in the recent past you only spotted in suburban shopping centers, now has stores on 34th Street and 7th Avenue, and Astor Place.

Businesses are clearly not afraid to invest here, which creates opportunity for income producing property investors.

Creative Real Estate

Who would ever think that Chelsea Piers includes a 70-slip marina, 200-yard golf driving range, quarter mile indoor track, and indoor skating rinks - among many other large attractions. If this projects succeeds long term, it will create tremendous opportunity for all West Side real estate.

The creativity of Downtown investors indicates that we have a healthy real estate market. Office buildings are being converted to residential space at rate of 1,000 units a year (75 percent more than anticipated), according to Carl Weisbrod, president of the Alliance for Downtown New York. More apartments mean more demand for stores and restaurants, which will increase investment returns in retail real estate.

Intelligent purchases of apartment buildings, retail strips, mixed-use buildings-even office buildings and hotels - will yield long-term profits. You ought to be looking at as many acquisitions as possible. One word of caution: Look at numbers real hard. In fact, get some help from your experienced accountant (experienced in real estate, that is), or mortgage broker, to be sure your acquisition will make sense to a lender.

Interest rates are stable, with banks offering 7.75 percent on apartment buildings in the $500,000 to $750,000 range, with rates even lower for large transactions. Banks and other institutional lenders are busy, as there are plenty of good deals around. So, be sure that your transaction is presented properly for prompt and favorable consideration.

Stable interest rates and a healthy (although selective) banking sector, combined with a favorable business climate and growing demand for real estate can provide exceptional returns to the active investors.

COPYRIGHT 1996 Hagedorn Publication
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