“It’s just a hesitancy”

A longtime executive at Cushman & Wakefield, Joe Harbert recently joined Colliers International as head of the commercial real estate company”™s eastern region. Harbert shared his thoughts on the local real estate scene with the Fairfield County Business Journal.

Business Journal: What”™s top of mind for you right now in commercial real estate in Fairfield and Westchester counties?

Harbert: The way I think about these things, you need to look at the demand side of the equation always and you need to look at it first. And that is connected intimately with the economy and with job growth. So it”™s conditionally where I start to look at these things.”¦
It”™s what”™s forefront in the news, what”™s going on in the world economy. You do have some trends that are out there that would cause some concern, one is that China”™s growth appears to be slowing, you actually have India”™s growth slowing as well. And we”™re all very focused on Europe and whether we”™re going to see an unraveling of the Euro and the European Union based upon the events of recent weeks. So those things are not entirely connected to what goes on in the U.S. ”“ you know, its kind of interesting to watch that the U.S. economy continues to grow, albeit more slowly ”“ maybe we”™re growing between 1.8 and 2.4 (percent right now according to the Fed ”“ but we”™re still a growing economy. The fear would be that the modest growth that we”™re now experiencing would dissipate if in fact Europe were to get into their own recession. ”¦ Those are the things that are on people”™s mind and they do affect business decisions. Obviously what goes on in the local economy and the national economy affect hiring;and hiring is what affects the demand for real estate in its commercial form of office spaces.

I just think that they”™re very cautious about the consumer confidence at this point. To me it”™s relatively unfounded, but I don”™t make all the business decisions for other companies. We just watch the accumulation of what goes on. I think America”™s obsessed now with the politics and the election, and we”™re concerned about what”™s going on in Europe. Despite that, the economy continues to grow. We continue to create jobs. It”™s in pockets around the country. Unemployment is headed down, interest rates are headed up. ”¦ We are kind of working our way out of the bad housing bubble. Foreclosures, they”™re still out there, we still got a lot to work out. The real problem is that there doesn”™t seem to be a tremendous desire on the part of companies to take the chance and hire that next new employee. It”™s just a hesitancy. Companies are sitting on a ton of capital. Corporate profits are way up. There are all kinds of positive signs in the economy that we choose to ignore. ”¦

What are the one or two industries doing best in New York and also have a significant presence in Fairfield and Westchester counties?

I am going to tell you something probably contrary to what most other people will tell you: I think it”™s the ”˜ed-med”™ complex. Education and medical are growing industries. New York City in particular is turning into a college town. I see that growth all over the place. I see that Westchester, Fairfield, New Haven ”“ there”™s tremendous momentum in those arenas. ”¦ Also in the city you have what you call the digital phenomenon which is really technical, it”™s the tech sector, it”™s advertising, media, digital media, that”™s a very vibrant segment. I think there are (property) owners in Westchester and Fairfield that hope that that spills up north. My suspicion is that it”™s going to spread east into Brooklyn before it goes much up into the north. I could be wrong about that. I obviously hope I”™m wrong, I”™m a Fairfield County resident. I”™d like some of those jobs up by us. But those are the pieces of the local economy, and obviously life sciences in New Jersey is still a growing part of the economy out there.
I would not be surprised as a Fairfield County resident if we saw, on some now-vacant parcel of land, dormitories. I would not be surprised at all. There are enterprising developers that see these trends. You have to see trends if you are a developer, you have no choice because you are going out there, you are finding financing, you are getting land, you are getting approvals from counties and cities and towns, the process is a long one ”“ so you have to be visionary to be a really great developer. I can see developers saying, ”˜You know what? That is going to happen, we are going to see this, and let”™s go and put up some modestly priced dormitory stuff. We”™ll figure out how to price it and let”™s do it.”™
We could use a ton of dormitories here in Manhattan.”¦ Manhattan rental prices are going up and they are going up pretty quickly and there”™s a shortage of supply. The countervailing pressures in Manhattan is becoming more of a university town in a lot of ways, and at the same time to get the students here they have a hard time affording the living quarters. So if there were more developable sites that weren”™t going to go over to condos in Manhattan, you could build dormitories. It”™s just the cost of doing construction. I think those things will end up in the boroughs.
In Fairfield County, the unemployment rate is actually going down. When you look at the national unemployment rate, it”™s in the upper eights. Fairfield County was at 8.9 what, 14 months ago? Now it”™s in the upper 7s.”¦ Its down, its below the national average. Westchester is obviously a little different but still kind of a positive, private sector employment up a percentage point year over year at the end of the quarter. I”™m kind of an optimist on this for Westchester and Fairfield as well.
The retail component ”¦ is very vibrant. New York City is ”˜under retailed,”™ and there”™s a boom going on down here in retail. You have the area of the city nid-town south that”™s got the lowest vacancy rate in the country. Everyone wants to be there and that”™s mostly driven by tech, advertising, media, digital media, software developers and so forth. It does strike me that ”¦ Stamford itself is relatively close to the city. It is an educational hub. I think some of these tech sector places that are popular are also surrounded by universities, so it could come to happen if that ed sector of the ”˜ed-med”™ sector does continue to grow up in Stamford, you could see people saying, ”˜you know this is a nice lifestyle up here; we could move some of our tech people here, they”™d live here, they wouldn”™t have to commute into the city.”¦ If you had a choice between Fairfield (County) and Brooklyn, you know, you might think about Fairfield. It”™s a nice place to live.

We have LL Bean, Microsoft going into Danbury Fair Mall, we”™ve had some other big retail additions. Will we see more chains saying “we”™ve got to be in Fairfield County?”

I live in Westport, I”™ve been there 22 years. We didn”™t have a restaurant scene in Westport. It was a struggle about where to go to eat. Now you”™ve got all sorts of great restaurants ”“ it”™s become a foodie town and it should have been all along. It had to be discovered and people had to have some confidence in the economy. But it”™s a booming restaurant scene ”¦ there, so I think the retail picture in Fairfield is pretty good. Westchester”™s different because it”™s very much towns ”“ Fairfield pretty much hangs together, it”™s pretty easy to get all the way from Greenwich, Stamford, Darien ”“ I think (Interstate) 95 is what makes it all easier. It”™s more of a connector than (I-287) is.

Lease accounting changes ”“ how much buzz in the brokerage and landlord community?

It”™s a topic that”™s been out there for, I don”™t know, 12 or 15 months .”¦ It will have some impact. I don”™t think it will be dramatic. It”™s probably more of a ”˜full-employment act”™ for accountants than anything else. There will be people needing to adjust how they do things, but I don”™t really see it that people are going to stop leasing space and want to buy their properties or the reverse. There will be some impact, there will be some adjustments, but at the end of the day its one of those things where they went back and they rewrote this thing a number of times. I think at the outset there was worry that it might dramatically change how people do their business. I think at this point I don”™t see it. I think its coming out to be much more of a shower than a hurricane.