5 Takeaways from the 2022 ULI NY Real Estate Outlook

April 2022

On March 16, 2022, hundreds gathered in Midtown Manhattan for the first time in two years to hear from New York’s leading real estate professionals about their predictions for the year ahead. While there was plenty of reflecting about the unprecedented nature of the last two years, the tone was cautiously optimistic. If you missed this great event, here are the six main takeaways you should keep in mind:

  1. Be cautious of volatility
Volatility has plagued the market over the last two years and we should continue to expect it over the next. From the economy, to the pandemic, to the geopolitical climate, things have and continue to change very quickly. Meg Brod, Senior Managing Director at Rockefeller Group, encouraged focusing on macro-themes rather than micro-themes to drive decisions in the face of volatility. For example, iwarehouses may be a better development investment than brick and mortar retail because warehouses are needed across the retail supply chain. Take bets on asset classes, locations and sectors, rather than smaller trends.

2. ESG investment criteria may add a new letter: “R” for Resilience
Charlie Rose, Managing Director at Invesco, observed that liquidity is up and banks are flush with cash and eager to invest in real estate. However, investors are looking beyond the typical “Environmental Social Governance'' criteria while evaluating investments and towards a new metric: Resilience. As our climate changes, real estate investments face new risks that must be conceptualized and evaluated. This is a relatively new consideration, and piecemeal frameworks for measuring resilience are only just beginning to emerge. But the increasing concerns about climate demonstrates the importance of including resilience expertise at industry oversight level.

3. It is the responsibility of companies to promote diversity, equity & inclusion
Since the last in person Real Estate Outlook event, the United States has evolved its conversations around diversity, equity and inclusion. Don Peebles, Chairman and CEO of The Peebles Corporation, described the inequality of opportunity he sees everyday in the industry, and called on companies to create greater opportunity to right the scales of inequality. He remarked that companies who care about democracy and capitalism should start being “aggressively inclusive” because both cannot exist without true equality. The session ended with a standing ovation, indicating, at least in theory, a pledge from the group to do just that.

4. Affordable housing is more important now than ever, but the path is unclear
Rent prices in Manhattan are up an astonishing 33% from only one year ago, an increase that represents the most significant annual rent spike in recorded history. While this jump reflects the volatility of the time, it also spotlights the dire need for affordable housing. This demand could drive investment and development for the foreseeable future. Eric Clement, SVP & Fund Manager at RXR, explained how RXR has shifted focus away from commercial investment and towards multifamily projects because rents are so strong. However, with the looming expiration of the 421a tax abatement program, it is unclear how developers can help address the increasing need for affordable housing without directly subsidizing it themselves.

5. Flexibility & convenience reign as the biggest trend of the year
The themes of flexibility and convenience spanned across all conversations at the outlook. It appears that most companies may never return to the office full time, but instead, as Meg Brod observed, the magic number appears to be three days in the office per week. This is important to consider for both commercial and residential real estate. Now companies need less office space, and residences need more. The “nook” or home office space is extremely valuable now whereas it wasn’t before March 2020. Similarly, amenity spaces are extremely important too; Rockefeller Group is marketing specific "zoom rooms" and conference spaces in their multifamily developments to accommodate for the residents doubling their apartment as their office. 

Originally written by Madeline Clappin and published in the Urban Land Institute New York’s Quarterly Newsletter, April 2022.