If you were to ask New York commercial real estate executives what they think about prices in the Big Apple, more of them are likely to say that property is overvalued in comparison with other major urban centres around the world. Many of them believe that there is an asset bubble, due to low interest rates.
These are among the findings from the spring 2014 edition of the Gotham Commercial Real Estate Monitor, a survey conducted by accounting firm Marks Paneth. Top commercial real estate professionals including property owners, brokers, agents, attorneys, and accountants took part.
Close to half (47 per cent) of respondents said they think that commercial property in New York is “moderately overvalued” when compared with property from other cities. This response represents a nine-point increase in sentiment compared with June 2013 and a three-point increase from January of 2013.
Thirty-one per cent of property executives surveyed said they believe low interest rates have created an “asset bubble” in the commercial real estate market that is similar to the housing bubble of 2005-2007.
Just over one-quarter of executives surveyed (26 per cent) stated that they did not believe there was an asset bubble. The rest of the respondents said either that they weren’t sure or “maybe.”
Property executives still rate commercial real estate as a sound investment. Most of them (54 per cent) say that investing in commercial property in Manhattan is either a low risk (36 per cent) or a moderately low risk (18 per cent) venture. A small number (4 percent) described it as high risk.
Executives described commercial property in Brooklyn as being lower risk than Manhattan. More than half (58 per cent) described Brooklyn as a low or moderately-low risk place to buy.
The conclusion from the survey respondents is that New York commercial property is expensive (possibly too expensive) but that, on balance, it is a worthwhile investment if the deal can be structured carefully.
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