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REBNY Confidence Index: Broker Confidence Increased in Fourth Quarter 2013, Expectation High for 2014
January 28, 2014
--Fourth quarter increase is the first one all year, 2014 looks promising as economy improves and foreign investment remains strong--
The Real Estate Board of New York’s (REBNY’s) Overall Broker Confidence Index for the Fourth Quarter of 2013 increased from last quarter, marking the first increase in confidence for the entire year. Overall expectations for the future are also on the rise, as brokers are optimistic about the real estate and financing market for the first six months of 2014, mostly due to the increasing health of the economy, according to REBNY’s Real Estate Broker Confidence Index released today.
“The commercial sector closed on a high note in 2013 and barring a large influx of space, we can expect this market to remain strong,” said REBNY President Steven Spinola. “We anticipate that the residential market will grow in 2014, as buyers expand their search into the other boroughs. Foreign investors have emerged as an important aspect in the Manhattan market in the past 12 months and we believe this activity will continue to enhance the market activity in the coming year.”
“After a slow start last year, the improving economy and property fundamentals led to an NYC Investment Sales rally [late in the year],” said James Nelson, Partner at Massey Knakal Realty Services. “These dynamics will carry over for this year as more large scale inventory comes on line and buyers from around the world wait with open arms.”
The Commercial Market Confidence Index reported an increase from the Third Quarter, up from 9.18 to 9.49. As employment increases, office leasing activity is also picking up and should continue this trend into the next few months.
Brokers noted that the supply of available space is steady. They have seen more tenants readily making decisions, but taking less space per employee. Keeping the supply and demand stable is expected to help keep prices solid for the next few months.
The retail market is also strong, with local businesses being more active than in previous years. The availability of financing now and six months into the future bodes well for commercial transactions.
“We may see even more foreign capital searching for a home in the United States, and New York City in particular, given the instability in emerging markets,” said Eric Anton, Managing Partner at Brookfield Financial. “Top-quality retail investment properties and well-located office buildings will be in high demand in 2014.”
Although confidence rose for the commercial market, the residential market showed a modest decline from 8.52 in the Third Quarter to 8.32, as brokers voiced their concerns about a lack of sales inventory and the potential for rising interest rates. Nearly a quarter of the brokers expressed trepidation that the inventory shortage has been driving up prices and forcing buyers out of the market. The Confidence Index for the market six months from now reflected an increase to 8.66, with hopes that more inventory and improved financing will boost future market performance.
Despite a modest dip in confidence, residential brokers have a positive outlook for 2014. High Manhattan prices have been nudging buyers to look for more affordable options in the boroughs outside of Manhattan, especially Brooklyn. This growth is likely to continue, while an increased amount of activity from foreign investors is also expected to be a major driver in the residential market.
Brokers identified two schools of thought on the residential market: the lack of inventory and higher interest rates that are making it more difficult for buyers to compete with all-cash offers, and the high prices and lack of inventory that indicate a strong market. Regardless of which opinion was held, the market is seeing low levels of inventory and although interest rates have risen in the last year, they are still historically low, which will keep the market strong into 2014.
About The Real Estate Board of New York
The Real Estate Board of New York is the city’s leading real estate trade association with more than 15,000 members. REBNY represents major commercial and residential property owners and builders, brokers and managers, banks, financial service companies, utilities, attorneys, architects, contractors and other individuals and institutions professionally interested in the city’s real estate. REBNY is involved in crucial municipal matters including tax policy, city planning and zoning, rental conditions, land use policy, building codes and legislation. In addition, REBNY publishes reports providing indicators of market prices for both the residential and commercial sectors. Please visit us online at www.REBNY.com
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