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