A time for pause – and urgency

Our country’s major cities are being overbuilt with too many high-rise residential condos and rentals at prices and absorption rates that can’t be sustained, while the urban and suburban affordable market is woefully underserved. 
The U.S. commercial real estate market has a classic oversupply issue driven by too much money chasing the same asset classes in the same place at the same time. It is very similar to skiing beautiful, fresh-powdered ski trails in the morning. In the afternoon the skier is tired, and the slopes are icy, and it may not be a good idea to take that last run. 
I’ve lived and worked in the real estate industry since 1980, when no one wanted to invest in New York City. The headlines said that the crime-ridden city was about to go bankrupt and corporations fled to suburban campuses, kicking off a housing an retail boom. And at that time, some of today’s hottest markets – Harlem, Long Island City, Brooklyn, Southern Manhattan and Jersey City – were non-existent. 
This meant that most of the housing built in the 1980s and early 1990s started outside of the major cities. Between 1980 and 1994, only 22% of permits issued in New York State were in the five boroughs, while 78% were elsewhere (see Figure A). This might seem hard to believe today but it was a fact. New York was selling Harlem for $1. Imagine that! Today, many of those same properties in Harlem are selling for more than a million dollars..

 

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