8 Bold Opinions on the State of CRE and Tech
It’s easy to get lost in a matrix of discussions on artificial intelligence algorithms, data harvesting models and climate change regulations at CREtech New York — a conference that the organizer calls the built world’s largest innovation and sustainability conference — especially at a time when the economic market is in disarray.
Fortunately, many thought leaders spoke at the event with conviction and clarity about the issues that matter to them most — including tech adoption, the return to office phenomenon, the affordable housing crisis, carbon emissions reductions, the Manhattan real estate market and, of course, the best place to get a bagel in the Big Apple.
If you missed the event, or just want a recap, some of the most impactful soundbites heard during presentations and panels on the main stage from Sept. 19-20 are shared below. To answer the bagel question, you’ll just have to attend next year’s event.
While those figures might be terrible for renters, they are fabulous for anyone invested in high-end multifamily properties. It speaks to Manhattan’s resiliency, Gilmartin said. But it doesn’t mean developers are rushing to break ground on more luxury apartments.
“We have no active tax abatement program for multifamily rentals in New York City,” she continued. “We deliver 30,000 units a year and we need 80,000 a year to keep up. So, we have a housing crisis … but no one will build new multifamily until there's a new tax program.”
And that’s just one of the constraints to multifamily development.
NYC has an affordable housing shortage and an office surplus, Gilmartin said, but both issues can be addressed at once. “The issue lays at the nexus between the housing crisis and the office market catastrophe,” she said. “Inside of all of these empty office buildings … is an opportunity to address the housing crisis.”
Technology can advance the process of figuring out conversions, she said. “If we do it the way we do things now, it'll take 100 years,” she said. “But with AI [in large data sets of available properties] I think we will be able to factor in zoning changes, building systems, cost profiles and investment considerations … to quickly hone in on a process that identifies which buildings, neighborhoods and markets are ripe for conversion and which should be tackled first.”
Most excess office space isn’t necessary, Gilmartin said, contending that the industry “can do better” than simply demand all workers come back to the offices they left behind during the pandemic. “The real estate industry generally has people stapled to their chairs because it reinforces this idea that we need office buildings to thrive in cities.”
If tenants are taking less space, they might as well make that better space, proponents said, and it’s tech that allows office occupants to do more for their employees with less. Most of the tech products and services championed at the event were ones that cater to delivering a better tenant experience.
That pruning of excess space only exacerbates the ongoing flight-to-quality trend.
“Around 70% or 80% of the tenants out there want to get into 20% to 30% of the buildings out there,” Rechler said.
Trophy assets are making up about 30% of all transactions, Gilmartin said. “The top 10% of office stock is renting at historic numbers of about $111 a foot; a high watermark even compared to the pre-pandemic situation.” And tenants in those spaces tend to be renewing.
Other speakers, including some big proponents of innovation, argued that location still trumps all — and that the problems in the office market are more fundamental.
While technology is a huge part of most developers’ strategies, a persistent theme at the conference was that some things never change, even if that flies in the face of tech capabilities and sustainability initiatives.
That attitude is especially prevalent in New York City, and in the type of trophy assets that are performing best, Mathias explained. “They’re paying for the high space and the view. They want clear glass; they don’t want tinted or shaded glass. So, you have heat loads from windows that require a lot more air conditioning.” It requires a tricky balance, he said, of trying to hit sustainability targets, paying for energy efficiency solutions and making tenants happy, all while also achieving the highest rents.
Still, sustainability took center stage at the event (literally) with looming regulations, ESG measures and tenants’ demands driving myriad technological innovations ranging from more sustainable concrete formulations to natural disaster forecasting and AI-abetted reductions in carbon emissions. With all of these innovations in play, speakers agreed that it’s easy to get overwhelmed.
While there was a lot of talk about investments in sustainability and tech to get people in office buildings and make their experience better, there was an almost unanimous consensus that the industry needs more clarity around tech usage and consolidation among providers.
Fittingly, given that she was the closing speaker of the main portion of the event, Gilmartin put a bow on it.
