Uncertainties remain today in the commercial real estate market as a whole, but things look sunny at least in 2025 for New York's Tri-State region, which includes coverage of New York City, Long Island, part of New Jersey, and other New York cities, according to a report from CBRE.
The CRE firm listed a few elements that will drive investment activity in the area. One of them is consumer spending. While retail immediately comes to mind, CBRE thinks strong consumer appetite will impact the entire CRE space from office to multifamily.
Another is that employment remains healthy, which CBRE said will give the Federal Reserve the "policy flexibility to lower rates slowly in 2025 in light of potential risks of higher inflation."
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Number three is GDP growth and real estate fundamentals "firming," according to CBRE. Both are expected to help lead investment activity in 2025, even if the 10-year treasury remains elevated.
Lastly, the expected business-friendly policies are expected to help the entire industry under the new Trump administration. This includes a looser regulatory environment, low risk of tax hikes, and economic development benefits from the Infrastructure Investment and Jobs Act of 2021.
While CBRE is bullish on New York's Tri-State region, overall, it did cite tariffs as something that could hinder economic growth.
The optimism comes despite CBRE revealing that New York Tri-State CRE investments dipped by 2.6 percent to $33.4 billion in 2024. The hotel, retail, and multifamily segments all saw declines, at 55.5 percent, 13.1 percent, and 2.3 percent, respectively. Office and industrial were the only asset classes to see gains, at 32.9 percent and 4.1 percent respectively. But interestingly in the fourth quarter, the retail and hotel sector were the only nonalternative asset classes to see dollar volume declines.
Despite the slowdown in overall activity, New York was the national top market for total investment volume in 2024, beating out Dallas and Los Angeles.
"Office investment volume is expected to increase as well as a deficit of available new construction office space enhances the value of the city's best inventory and older buildings begin trading at a discount with many slated for repositioning or conversion to other uses," CBRE wrote.
In addition, the CRE firm expects to see New York City carry "historically tight" residential vacancies due to the housing shortage that's expected to keep prices high.
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