"[New York hasn't] had a downturn," Orr agreed, separately in the Power Panel. The economy has simply "lost momentum," he continued. Freedman expanded in the Town Hall some of the problems that will come to bear on the market. "The bloated cost of construction affected the renewal versus relocate" costs for companies, he explained. The effect was that "tenants radically overstated space requirements" and began "programming growth", but soon that extra space will depress the market when it comes back into play. Still, Freedman urged, "Don't anyone lose their composure."

The panels often pointed to the previous downturns in 1987, 2001 and 2004 when fundamentals were much worse and the economy had rebounded from all of those. Malkin explained that because New York tended to have larger highs during boom periods, the lows would also be lower on the downswings.

"There will be cycles," Levinson pointed out. Whenever there is a downturn, he expounded upon the point, it always comes from something unexpected. "If we anticipated it, we wouldn't have it." Levinson said the downturn had not stopped all deal-making, either, only unnecessary deals. "The only kind of transactions that get done are the ones that must get done," he voiced, singling out "discretionary" projects as the kind of deals which get put on hold. Cohen's research backed up this notion, noting that deal-making was down, but there was an overall "flight to quality" for the deals that did come through.

Sturner and Freedman offered their own advice to landlords. "Keep your buildings full," Sturner implored. He explained that vacancy rates were looking to jump from around 6% to around 10%, so keeping tenants was optimal. Freedman felt it was a good time to hang onto property, as well, noting that some people will be "compelled" to do so, but that it was not the right market for selling. Cohen pointed to the numbers for more confirmation, explaining that despite the feel, New York has "one of the lowest vacancy rates in the US." The city has "pretty tight fundamentals, but it is a volatile market" which will result in a slower recovery time.

Pinsky zeroed in on opportunity, especially in the city. Orr concurred, looking to international capital as a particularly lucrative area. New York City, he continued, is a "very attractive environment for foreign investors."

Levinson followed this point home. "There is very little money to be raised in the US," he explained, indicating the pool of money and players is much bigger now. The panels turned to the foreign markets and addressed the future of the industry.

"There is not an inevitability for the US's domination of the world," Pinsky said. "The way we've been living is not sustainable." The US, he continued, has trouble keeping foreign talent in the country since 9/11, as well as difficulty raising money domestically. The hope and the advantage was that Asia and the Middle East give the US a "vote of confidence in our economy, in our city." Freedman agreed during the town hall discussion, saying the "smart money is going to migrate". Yet, Cohen issued a note about the unintended consequences of foreign money and the current bailout proposal, pointing out that the US government did not have $700 billion to lend. Wherever the money comes from, he explained, that loan will prevent that--likely foreign--capital from getting invested elsewhere.

The presidential debates were not the only crowded house to be affected by the bailouts. Both panels pointed to previous situations where the government helped industries, such as the Savings and Loan crisis in the early 1980s. Orr stated simply, the "role of government is to create and maintain the kind of conditions that allow industries to grow."

Both the Power Panel and the Town Hall saw the downturn optimistically, seeing no great revelation about the end of New York's real estate market. It comes down to one thing in real estate, as Levinson concluded, "There is opportunity for those who have the courage and foresight." An audience member added his own addendum "and money."

Instant Insights /

Panels: 'The Sky Is Not Falling'

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