NEW YORK CITY—Three years ago next month, Lee & Associatesopened its first office in New York. caught up withJames Wacht, president of Lee &Associates' Manhattan and Queens offices, to hear how themarket has changed in this EXCLUSIVEinterview.

| Since Lee & Associates NYC openedthree years ago, what changes have you seen in the office, retailand investment sales markets?


Wacht: The biggest story has been theemergence of Midtown South as one of Manhattan's preeminent officedistricts. But another trend is the growing desire of manytechnology companies to locate in Brooklyn and the conversion offormer industrial buildings to office use. It will be interestingto see the success that Jamestown has with the six million squarefeet of space recently acquired at Industry City and the 963,000square feet that Jared Kushner has at Dumbo Heights.


One number sums up NYC's retail market: $3500 per square-foot.That's the current market rent for prime retail on Fifth Avenue andit's driving retail rents in the outer boroughs. Williamsburg andnow Bushwick have become a hot destination for big-name retailersopening brand-name stores and also opening new concepts. Ouroffices has closed over 30 retail deals in Williamsburg/Bushwick inthe past two years and is currently handling 26 exclusives in thosetwo neighborhoods. Even the Bronx is being considered now forsignificant retail expansion by national retailers.


While “hot” is an overused word, I really can't think of abetter term to describe the investment sales market. Almost allasset classes including office, residential and retail are sellingat very low capitalization rates. Despite the specter ofsignificant changes to the rent laws that will ultimately favortenants, there is a huge appetite for rent regulated propertiesthat are being purchased at sub 4% capitalization rates. Retailcondominiums also are in big demand by local investors with somesales exceeding $ 3,000 per square-foot. Development sites forluxury condominiums are now being sold for in excess of $1,100dollars per square-foot in prime Manhattan neighborhoods—likeTribeca, the West Village and Chelsea—and $450 per square foot inBrooklyn. My boldest prediction for 2015 is that prime residentialdevelopment sites in Manhattan may sell for in excess of $1500 perbuildable square foot

| Do you see these trendscontinuing?


Wacht: The office market will continueto strengthen over the next 18 to 24 months. If employment numbersand economic growth slow down, however, the trend will quicklyreverse itself. The Investment sales market will stay strong aslong as interest rates stay low and foreign investors continue topour money into the market. For the most part, foreign investorsview Manhattan, and now even Brooklyn, as a good place to parktheir money for safekeeping.


Local investors will begin to pull back and wait on thesidelines until pricing becomes more attractive and the marketbecomes less of a momentum play. The quick rise of retail rents inthe prime neighborhoods will begin to level off over the nextyear.

| What are the three mostsignificant factors you see influencing the New York real estatemarket over the next five years?


Wacht: Interest rates, employment andeconomic growth, and foreign investment.

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Rayna Katz

Rayna Katz is a seasoned business journalist whose extensive experience includes coverage of the lodging sector, travel and the culinary space. She was most recently content director for a business-to-business publisher, overseeing four publications. While at Meeting News, a travel trade publication, she received a Best Reporting award for a story on meeting cancellations in New Orleans during Hurricane Katrina.