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In my line of work, I take a lot of meetings. At those meetings, I often speak with the people who run some of the biggest, most successful New York City-based real estate investment firms. It’s a privilege and a luxury to sit with them, so I rarely betray confidence by revealing what happens behind those closed doors.
But, this time I feel compelled to share.
In the spring of 2018, I took a meeting with leaders of a very well-known capital management firm (it has one of those jaw-dropping art collections and a Central Park view that means it manages many billions in assets and has done for a long time. You may know the type). I sat in the conference room and explained why more people ought to have access to Manhattan residential real estate investments, that it’s one of the best real estate markets in the world — a market that historically only the elite have been able to invest in.
Their response? They believed that New York City housing was headed for a major downturn, and they wanted no part of it. And when they talk, an awful lot of people listen.
Fast forward to January of 2019 when I met with a different (but equally important) asset manager in the same kind of office — slightly different art, same Central Park view. At this meeting, the suits told me that they have been aggressively buying New York City, that they’d seen a pullback that they recognized as a once-in-a-decade buying opportunity. The tone could not have been more different than the spring 2018 meeting: They were buying in a buyer’s market, and they were excited.
Why should real estate investors like you care about any of this?
The first reason is that you should know that even the smartest minds in this country, the ones closest to this market, cannot accurately predict the market’s bottom — nor can they agree.
The second is that even if that first gaggle of suits was correct about the outlook last spring that the market still had farther to fall, it was still an interesting time to consider investing in Manhattan.
The important lesson to be learned here is that if you are trying to tick the absolute bottom of the Manhattan market, you are probably going to get the timing wrong. And my message to you is that it probably doesn’t matter all that much. While it would be ideal to buy the absolute bottom, certainly nobody remembers exactly when the Dursts, Rudins, LeFraks, Tishmans, Fishers, Malkins, Resnicks, Roses or Zeckendorfs started buying. Because it doesn’t matter. All that matters is that they accumulated large portfolios of real estate in the world’s best market — and just held on to it, for decades. That’s the lesson: Buy and hold Manhattan.
New York City’s housing market has notoriously short pullbacks. After the terrorist attacks of September 11, 2001, the residential market only declined for about six months. After the financial crisis in 2008-2009, the market declined for about a year. But this time around, Manhattan residential real estate prices have been declining for three straight years since the 2015 peak. And that, my friends, almost never happens.
Manhattan is one of the best real estate markets in the world, has been for the past century and is very likely to continue being so for the foreseeable future. It’s a 22-square-mile island with an 830-acre park at its center, where highways, railways, shipping lines and some of the world’s busiest airports converge. It’s the cultural capital of the world’s largest economy and the financial capital of the world. The smart money may disagree about exactly when to invest, but I promise you, the fat cats did not divest all their Manhattan holdings, and they never will.
At yet another of these meetings (different firm, more art, same park view), I asked a very senior person whether he thought now was a good time to invest in Manhattan. He said it best of all — and with the brashness of a real New Yorker: “It’s the best f***ing real estate market in the world.” I couldn’t agree more.