Smaller cities’ real estate to stall- what are your town’s prospects?

June 23, 2009

New York and a handful of other major U.S. cities are down, but will never be out as far as their commercial real estate goes, a leading New York real estate private equity investor said Monday at the Reuters Global Real Estate Summit.

“New York’s not going away- it’s THE global city.”

Second tier cities are another matter entirely, said Thomas Shapiro, president of GoldenTree InSite Partners. “We are a big believer in the big city theory which is that the bigger cities will continue do better, to the detriment of secondary cities.”

Companies always go to where the best talent is, he explained, meaning cities such as his big five– New York, LA, San Francisco, Boston and Chicago– remain magnets, their status self-perpetuating

Goldman Sachs is not moving to Miami because the intellectual capital is in New York- ditto Boston, ditto San Francisco, ditto LA.”

Here’s Shapiro’s prognosis for how some other U.S. cities will fare as the real estate market recovers:

San Francisco: one of the top markets, Shapiro said, because “San Francisco has a diversified economy.”
Chicago: “It’s a boom and bust town, but it is an important center.”

But other, lower cost cities are cheap for a reason, Shapiro said:
Detroit: “It’s cheap but I will never be convinced it’s cheap enough- we have so many issues in the auto sector.”
New Orleans: “People always pitch New Orleans, ‘gee you can buy a fantastic building for $60 per square-foot, but $60 can still go to $30.”

(Reuters photo)

3 comments

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Lot’s of talk about moving. How about building? I live near a small city and we have a pretty good base with farming, a military base, and small manufacturers. The small manufacturers are hurting and good jobs are scarce. I do not believe the Government or the Banking Community has a very good picture of the real problems facing the economy. Pushing change in the energy fields, health care, and banking all at once is going to have disasterous results in some areas. I think we are seeing lots of imaginary profits in the stock and energy areas, and also in the banking sector. When the second shock wave hits then we might see some planning and real change in the business community.

Posted by f belz | Report as abusive

Thomas Shapiro is an elitist with his big 5 cities. He can not survive a month on his own. Who props up these cities (besides non existant fabricated obama funny money)? When the collapse comes the people in the heartland will survive. Mr Shapiro will RUN to get out of the chaos of his “global city”.Without others to wait on him he is a clay pigeon.

Posted by EarlyCSA | Report as abusive

What about Las Vegas?