NYC Economic Development Outlook: CRE Investment Opportunities Changing The Market

Twice a year, Herbert Smith Freehills Kramer hosts "Rethinking Real Estate," an invitation-only event where industry experts discuss the latest in New York City's commercial real estate (CRE) sector and the economic forces that are driving activity. The latest iteration of the series took place on December 9 in the Multimedia Conference Center at our offices at 1177 Avenue of the Americas.

The event consisted of two panels: "How Public Priorities Are Opening the CRE Market and Catalyzing Growth in NYC" and "2026 Outlook: Navigating Uncertainty and Taking Advantage of a New Age of Opportunity in CRE." Dan Berman, Managing Partner, Real Estate, U.S., at HSF Kramer, opened the event with brief remarks.

HSF Kramer Partner and Head of Land Use, Elise Wagner, moderated the first panel, which included industry leaders such as New York State Homes and Community Renewal (HCR) Commissioner RuthAnne Visnauskas, Kasirer LLC CEO Suri Kasirer and Andrew Kimball, President and CEO of the New York City Economic Development Corporation (NYCEDC).

Economic development and the future of large public projects

The panel began with some optimism from Kimball, based on recent achievements of the NYCEDC, which is involved in hundreds of active projects in the city, including a few large, transformational developments.

He cited the yearslong cleanup and acquisition of auto chop shops in the Willets Point neighborhood in Queens — work that has been carried out across mayoral administrations and has led to new affordable housing, Willets Point Commons, and a privately financed professional soccer stadium being erected in the area around Citi Field; the lottery for the affordable units just recently started. Kimball also expressed his excitement about the future of the Brooklyn Marine Terminal, now that the strategy to revitalize 122 acres on the Brooklyn waterfront is underway after years of planning. The city will oversee the construction of a 60-acre, all-electric port while raising 6,000 new affordable housing units out of the floodplain, among many other building initiatives.

"Just in my first year at EDC over a billion dollars of projects have been jointly funded by the mayor and the governor," Kimball said. "That is astonishing, and I think early signs are that for the mayor-elect and the governor, it will continue to be a strong partnership. So I'm very optimistic about where things are going with some of these big projects."

Kasirer noted that the work at the Brooklyn Marine Terminal required extensive community engagement and that the efforts from the NYCEDC to engage with those voices were crucial in getting the planned project over the finish line.

Supporting affordable housing development across the state

When the conversation turned toward the state's role in supporting housing construction, Visnauskas spoke on the efforts by the state.

"Traditionally, housing agencies were really focused on getting 100% affordable housing built with bonds and 9% tax credits. And in the last decade, I think we have all been made aware that not just affordable housing, but housing writ large, is really our mandate," Visnauskas said.

This year, HCR, in partnership with banks and community development financial institutions, launched the Housing Acceleration Fund, which will provide subordinate debt as part of construction financing packages for mixed-income residential projects. The fund is designed to utilize public capital to leverage private capital investment in mixed-income multifamily rental production. The fund is estimated to generate upward of $1 billion in new housing investment throughout the state.

A mixed economic picture comes into view

Speaking on the economic situation in New York City, Kimball outlined clear positives and negatives. The city has a high workforce participation rate and has seen growth in many sectors, including life sciences, green economy initiatives and AI, but there are notable challenges: Job growth has slowed over the past year; federal funding for the National Science Foundation and the National Institutes of Health is under threat; and there remains an obvious, persistent and pervasive affordability crisis that threatens the future of young people in the city.

And while the city attracts more young workers than any other major metropolitan area in the U.S., many find it unaffordable to raise a family here.

"You have this massive influx of young people coming to New York City — 565,000 recent college/university graduates just in the last three years," Kimball said. "That's on top of the half a million [people enrolled] in colleges and universities in New York. That's over a million of our 8.5 million people. That speaks to the strength of our economy, but they tend to stay here eight to 10 years. And when they get to their 30s and think about creating a family, they are leaving in big numbers."

Affordability priorities: Childcare and housing

Wrapping up the first panel, Wagner asked Kasirer what she expects Mayor-Elect Zohran Mamdani's priorities will be.

Kasirer said that it's likely that Governor Kathy Hochul and Mamdani will want to work on making universal childcare a reality. Many women left the workforce during the COVID-19 pandemic partly as a result of unaffordable childcare costs.

She also outlined immediate solutions to begin the campaign to solve the city's housing crisis.

"The other issue is bringing back online the apartments that are rent-stabilized but that are not able to be rented either because there are legal disputes or because there's not enough money to fix them up," Kasirer said. "There are estimated to be anywhere from 20,000 to 50,000 units. If we can figure out a way to incentivize people to fix those apartments and bring them back online, we can really make a big dent in the housing crisis in this city."

Kasirer also raised several ways the new administration can hit the ground running once Mamdani is sworn in on New Year's Day, including filling the roughly 14,500 vacancies in city government, bringing insurers together to discuss how to reduce rising insurance costs on affordable housing and increasing support for general project plans (GPPs) to efficiently execute public development initiatives.

Incentivizing private affordable housing development

The second panel was moderated by HSF Kramer Partner and Chair of Real Estate, U.S., Jay Neveloff, who was joined by Hudson Yards COO Andrew Rosen, Deutsche Bank Global Head of CRE Dino Paparelli, StacomSilverstein Co-CEO Darcy Stacom and Silverstein Capital Partners President Shawn Katz.

Neveloff began by sharing his view of the market, a positive one given the transaction activity and capital flows his legal practice has seen in 2025.

"Interest rates have stabilized and are coming down. Every brilliant person is telling you that the Fed is going to lower the [federal funds] rate even more. I expect they will. I'm not quite sure that they need to, but they're going to, and I encourage it," Neveloff said. "But I'm really optimistic, because I'm seeing an abundance of capital and an abundance of deals."

Addressing the dichotomy between the economic strengths of the city and its struggles, Neveloff asked the panelists how the city and the new administration can tackle the lack of affordable housing.

"Real estate has basically thrown up their hands over the last few years and said, 'These programs don't work. We can't build housing. We can't rent our apartments out,'" Rosen said. "We need to sit down and actually figure out what does work and build the housing or create the opportunities. Otherwise, the opportunities are going to go elsewhere."

Another necessary step, according to Paparelli, is to invest in reducing the time it takes to commute in and out of Manhattan.

"By allowing people to commute regularly and having predictable timing from areas outside the city, we could probably facilitate some of the retention that we see these days in more central areas in New York City," Paparelli said.

Katz emphasized that from an investment and capital standpoint it's all about removing uncertainty, including around construction costs and building timelines, and that the effect of uncertainty is evident in metrics such as cap rates, which have been expanding despite solid market fundamentals.

The evolution and future of New York City's office market

The conversation shifted to the office market, with Paparelli noting that office space in New York has been the most important asset class for commercial mortgage-backed securities issuance this year.

And according to Stacom, the market for Class B+ to Class A office space is very tight right now. She added that some office leases are coming with a requirement for workers to be in the office five days a week in order to drive up ancillary revenues in the building.

"I've never seen anything like it," Stacom said. "Rents are now $200 to $250 a foot. And now all of a sudden, $300 a foot is attainable."

Rosen has similarly seen rents at Hudson Yards increase dramatically, which has enabled the rise of new Class A office space.

However, "just finding enough capital to build a $4 billion or $5 billion building is not an easy feat," Rosen said. "What we've relied on is partnerships with tenants that can actually put some piece of that building, or the whole thing, on their own balance sheet. And that's been the way we've developed a lot of the buildings in Hudson Yards."

Will the data center boom last? Proceed with caution

The final question from Neveloff centered on what might be the most popular subject in today's market: data centers and how they might evolve in the coming years.

Rosen began by outlining how the main constraint on the data center market is primarily energy availability. While everyone wants to build, there's a limited amount of power that can be distributed, and increasing demand from data centers is driving up the cost of energy.

"Hopefully that leads us to a place of stability for these projects," Rosen said. "For us, we're not building on spec. We're building once these are fully leased."

Stacom raised concerns about how new technology may disrupt the nascent data center market.

"One thing I watch out for the most is quantum computing, which they used to say is 30 years away and may now be within 10 years away; that will have a huge impact on the data center market," Stacom said. "[Rosen] is doing it the right way. Get the anchor tenant, then do it. But ultimately, I think the speed at which they may become outdated is going to be pretty frightening."

Katz sees data centers as a corporate credit play — underwriting the tenant and its credit. He said there are ways to gain exposure to that corporate credit, including from a dividend-yield perspective, through more liquid assets. Similar to Stacom, Katz had doubts about the sustainability of the data center market.

"You look at the stories of real estate that are tied to one specific industry, like life sciences or [film] studios, and you see amazing jumps in those sectors, and real estate floods in, investment floods around those sectors and then something disrupts them. Then the real estate is not worth what it was and it's challenging," Katz said. "When you look at data centers, you could be seeing that right now."

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