1994: is it the beginning of a new upswing?

After several years of pessimistic and negative outlook, New York real estate is becoming exciting again! The first half of 1994 has given clear signs of renewed activity and enthusiasm. In all areas of the Manhattan market an increasing number of deals are closed and many players who have been watching from the sidelines are back in the fray.

This is true both for new leases and for acquisitions and there are several reasons for this increased activity:

* Throughout the United States there is a growing feeling that the recession is over and most new economic statistics confirm that we are again in a period of growth. Most companies that had "downsized," "re-engineered," etc., are now facing their markets with increased efficiency and a higher productivity and are now ready to go into an expansion mode again. This leads both to increased investments in real estate (land, factories, offices, etc.) and to more leasing of office, sale and service facilities.

* New York is going through a period of renewed - if cautious - optimism. The new City Administration has shown intentions that are more favorable to business, as they seem to realize that this is a key factor for the city's prosperity and, indeed, survival. There is new faith in the business community that these intentions will be translated into concrete measures (repeal of the rent tax, decrease of the hotel taxes, etc.) that will encourage doing business here, and this will benefit everybody. In any case it seems that the massive exodus of businesses to the suburbs or to other states has been staunched and we now see many outfits coming back or starting out in New York.

One of the traditional strengths of New York has been in the Financial, Banking and Insurance sectors. These were hit more than most by the recent recession and this had been severely felt in New York's real estate market. These sectors have staged quite astonishing comebacks recently, often with record profits. Many are in growth phases again and this is most encouraging as it translates directly in increased leasing and purchases.

The other strength of New York has always been based on overseas capital expressed either as real estate investments or as a trading base for foreign firms who want a presence in the Western Hemisphere. For them New York has been, is and probably will continue to be the financial and commercial capital of the United States. It should also be noted that after some initial European euphoria when the old Soviet block disintegrated, reality has begun to sink in. It is proving less easy to do business in the countries of Eastern Europe, and Western Europe is also going through its share of problems, which range from economic recession to political instability. It is interesting to see the European investment psychology switching again as they are once more looking at the United States in general, and at New York in particular, as a safe place for business and trade, where - despite some cyclical adjustments - one should have a presence if one wants to be international.

It should be noted, however, that the opportunities that these times offer will benefit only those who act upon them. Already we have the first sign of the upswing, which is the increased activity. What will follow almost inevitably is the increase in prices and that has only started to appear. It seems that this is the time that people will look back on and regret that they didn't buy, lease or expand while good deals could be made.

At Anderson Organization we see this as a period of growing both for ourselves and for our clients. Expert management and aggressive leasing have put our clients' portfolios in excellent shape (over 60 percent of the buildings under our management are fully leased) and we are working with several old and new clients who are interested in taking advantage of the present market and are proceeding with new acquisitions. We have opened a new office this year in order to better service our overseas clientele and are looking forward to this exciting period. For cautious and prudent investors who act with the help of experienced advisors the future should augur very well.