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Here’s How CRE Sales Can Truly Return to Pre-Pandemic Levels

by Neil A. Dolgin

The Wall Street Journal (WSJ) recently reported on investors who are diving back into commercial real estate and driving this year’s sales volume to pre-pandemic levels. Combined with lower interest rates, they are reporting a renewed optimism that the worst of the pandemic may be behind us. Driving that conclusion is data from Real Analytics that investors purchased $144.7 billion of U.S. commercial property in the second quarter, 14% higher than the volume of the second quarters from 2015 to 2019.  

The WSJ also noted that not every sector is recovering. Tenancies in malls and office buildings decreased during the pandemic along with a reduced demand for office buildings due to Covid and work-at-home requirements.

In my July post, I wrote that “CRE firms and brokers can rest assured that New York City is coming back, and there are still plenty of opportunities if they are willing to adapt accordingly to changes in the market.”

Today I see encouraging signs as well as some weakness in the metro-area commercial real estate marketplace. The signs are everywhere that we are making progress, but we do have a ways to go before we have returned to pre-pandemic levels.

We have met brands, manufacturers, service companies and retailers who are looking to buy a building as a long term commitment to the metro area. With prevailing market rates and despite limited available inventory, it makes sense to buy now if you can find a suitable location. 

We also work with small commercial real estate investors who are finding few investment opportunities for consideration. They’re locked out by inflated prices in certain building types and sizes. “We can’t afford to buy a commercial building in the New York metro area because it’s too costly and the ROI doesn’t warrant it,” said a recent client. 

These investors are scratching their heads, too, because the high tax rates do not add up.  It’s why several large companies are talking about leaving New York City and moving their headquarters to a Southern state to avoid them. We think the city needs a more productive approach to taxes so that companies can find their way back to New York City. 

Another challenge is crime. According to Bloomberg, the number of shooting victims in New York City, up a stunning 102.6% over two years ago, is just now starting to decline.  We have had far too many shootings throughout the City. It’s absurd and scary if we can’t walk and enjoy the streets with confidence. We were showing a Times Square building to a group of investors looking to relocate their business to New York City. What did they see? Times Square was empty with few pedestrians looking into too many empty retail storefronts. 

That’s why the mayoral race is important for commercial real estate. Mayor DeBlasio and Governor Cuomo would have achieved far more for our industry by working together. The focus of Brooklyn Borough President Eric Adams on reducing crime, his ability to work with the new governor, and his overall experience make him an excellent mayoral candidate for the city. I think an Adams administration will head in a positive direction and put us on the right track to start rebuilding New York City so that we can achieve and exceed pre-pandemic levels.

Neil A. Dolgin is co-president of Kalmon Dolgin Affiliates. Founded in 1904, Kalmon Dolgin Affiliates (KDA) has grown into one of the New York metropolitan region’s leading commercial and industrial real estate firms. Kalmon Dolgin Affiliates specialize in all aspects of real estate services for developing, managing, selling, leasing and marketing commercial and industrial property. KDA’s highly-trained professional brokers offer clients a practical, street-wise approach to commercial and industrial real estate brokerage, leasing and sales, supported by the latest in real estate marketing, management and research technology.

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