"We as an industry have seen a major reduction in activity due to a decline in the economy," Speyer said. "But we're not changing our strategy because we believe that uncertainty breeds opportunity. Buccaneers of the real estate industry always look for ways to create value in unique situations.

"This opportunity won't be like the early 1990s with the RTC selling paper at huge discounts. We're not suffering from oversupply because the high barrier to borrowing in the 1990s was great and we hope it continues because it's the best traffic cop we could have," Speyer said. "Real estate is fundamentally stable and there will be much less effect on ownership because it is much better positioned to deal with it."

The Sept 11 attacks on the World Trade Center dealt a devastating blow to the people of New York, but Speyer said the commercial real estate market has absorbed the shock. "New York has faced the loss of 15 million sf of Class A space Downtown, which was 10% of the Downtown space and 4% of the space in Manhattan. The immediate impact is a shot of adrenaline, and I suspect all of the Class A space in Manhattan will be leased by the end of the year."

Over time, Speyer said Manhattan will emerge even stronger. "Long-term we will see companies relocating back to Manhattan," he said. "Although many companies will think about decentralization, at the end of the day we believe that CBDs are here to stay. Walk out to any street corner at any midtown block and just watch the people. There's theater in any major city. There's an intellectual reservoir in CBDs that isn't available in the outer rim. Our company will continue to invest in CBDs."

Speyer projected that owners in most markets will see a slight decline in pricing, although some markets could be hurt worse than others. "The inflation factor in rents will be pulled down because there will be less activity, and a few markets will see rents deflate as they did in the late 1980s. The uptick will happen much quicker because we don't have oversupply."

Savvy investors have the chance to find winners in the months ahead if they use their creativity wisely. "There will be a softening in prices of properties for the next 12 to 24 months creating a great opportunity for people with capital," Speyer said. "We are going to continue to be investors. We are always selling and buying. Steady on the course is no longer the rule and in general we have turned from an industry of long-term investors to one that is always buying and selling."

Addressing a room full of his fellow leaders of Manhattan's commercial real estate industry, Speyer expressed the credo of the happy warrior. "Real estate is the last bastion of the entrepreneur. I don't know about you, but I love getting up every day," he concluded.

Instant Insights /

Today's Uncertainty Breeds Tomorrow's Opportunities, Real Estate Leaders Told at Manhattan Conference

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