Interviews

Foreign Capital and New York Real Estate

Marty Burger, CEO of Silverstein Properties
October 30, 2015

Marty Burger, CEO of Silverstein Properties, weighs in on foreign capital's role in New York City real estate

Overview

• The United States is a safe haven and is attracting a lot of the world's capital
• The capital inflows favor internationally renowned cities, especially New York
• The capital spurs rising prices for operating properties and new development, especially in condominiums, where foreign investors can park capital

Transcript

Zell/Lurie: Let's turn to the financing side of things. What role is foreign capital playing on the demand and supply sides of the real estate market? Who are the players? What are they looking for? And do you think foreign capital is a bigger deal in New York than it is in other cities? Marty Burger: We're the safe haven for a lot of the world's capital, whether it's the currency fluctuation from South America or political risk in maybe Russia or just the unknown of what the government's going to do in China or other Asian countries, or just the diversification out of the Middle East—we're getting it from everywhere. It's coming in from Europe, it's coming in from Asia, it's coming in from the Middle East, from Canada—we're just seeing this influx of foreign capital. So where does it come into the United States? Luckily, New York is one of the better known cities, so it's coming to New York, it's coming to Miami, it's coming to San Francisco and LA. But I'd say that New York is getting more than its fair share. So what does that mean to us? It means that capital has to find a place to go. And it's going first into operating properties, but then the operating properties get bid up and there's only so many of them that are for sale. And now, it's spurring a lot of development. It's spurring land purchases for future development. And as I talked about the residential rentals not being able to be built because of the land prices, that's a result of that. The success of the condo markets is because of a lot of foreigners buying condominiums—it's the easiest way for a foreigner to invest in the United States, to buy a condominium. It gives them a place to live, a residence and it gets their money into an asset. Now that pricing is all lifted—everything—and the land prices are up, you can't even build a residential rental project unless you owned land a long time ago at a different basis. So, we've seen, you know, great things happen when money comes in. There are projects that really should be built that are going to be built now because of this foreign capital, but there's also projects that maybe shouldn't be built that are going be built because of this foreign capital, so there's good things and bad things about it.

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