On February 19, fifty members and guests of the FACC gathered at member firm Baker & McKenzie LLP for a very timely panel discussion that explored 2009 Trends in New York City Real Estate.

Skip Rankin, Partner, Baker & McKenzie, welcomed attendees and briefly introduced the firm’s French Desk. Mr. Rankin then turned the floor over to the panel’s moderator, Gerard Hannon, Partner & Head of the New York Real Estate Practice Group, Baker & McKenzie.

Mr. Hannon provided the context of the discussion. Referring to a number of recent articles, he stated that New York City is currently bearing the brunt of the real estate downturn, in part due to the impact of the financial crisis on the city’s economy. He also noted that New York is one of the most expensive cities in which to build, putting the city at a disadvantage when trying to attract new business.

What does this mean for the future of commercial, retail and residential real estate? To answer this question, and guide attendees “through this landscape known as Manhattan”, Mr. Hannon turned to the four panelists.

Providing valuable insight into midtown Manhattan’s commercial real estate market, Snezana Anderson, Senior Vice President, CB Richard Ellis, addressed the impact of the current crisis. According to Ms. Anderson, availability in this area has skyrocketed. Indeed, between January 2008 and January 2009, the availability rate increased from 7.8% to 13%. Asking and taking prices are also spreading, and rents have dropped per square foot. One can “now bid at half the price”. Although deals are slowing as both landlords and tenants hesitate, there is hope for a turnaround by year-end.

Bernhard Weinstabel, Director, Cushman & Wakefield, addressed the downtown market. While offering a more optimistic outlook, he echoed similar themes by describing an availability increase of 30%, as well as a downturn in sales and investment activity. Small tenants are dominating this market today. Discussing prospects for lower Manhattan, Mr. Weinstabel explained how the crisis in the financial services industry strongly undermines the development of this area, once considered by some as the city’s next hot spot.

Annette Healey, Senior Vice President – Retail Services, CB Richard Ellis, explored Manhattan’s retail market. Identifying this market’s key corridors, Ms. Healey described the high level of retail vacancy that is evident today, particularly within the luxury market and along the Madison Avenue corridor. As in the commercial sector, retail deals are taking far longer to finalize today; potential buyers are hesitant to invest. Ms. Healey offered her candid projections for this market by suggesting that “confidence will come back”, but the luxury market, in particular, will suffer in the meantime.

A burst of activity has been evident in the city’s residential market, as discussed by Randy Lombard, Associate Broker, Prudential Douglas Elliman. Experiencing more bidding wars today, Ms. Lombard stated that “the property market is not what it once was”. Residential prices are down 25-25% and may decrease further. As some buyers are going so far as to walk away from deposits, concessions are being increasingly made by landlords in the form of free rent, for example. Offering her insight on the importance of good credit and liquidity, Ms. Lombard concluded her remarks by describing the opportunities that may exist for buyers and renters today, especially for foreign investors.

A dynamic question-and-answer session followed the panel discussion.

The FACC would like to thank member firm Baker & McKenzie LLP for graciously hosting the panel and breakfast reception.