Author: Andrew Levine

Two weeks ago, I had the good fortune of attending NYU’s “the Icons of the Industry” event featuring Bob Knakal and CBRE’s Global Chairman of Brokerage, Stephen Siegel, and I figured I would share a few takeaways from the evening. 

The always stellar and dapper Bob Knakal impressed with an overview of NYC’s commercial real estate market and, with usual fluency, he reported on key metrics relating to sales volume. In short, the numbers are comparatively bad and well off the peak and the best that could be mustered was that we all “stay alive until ‘25” and pray that we aren’t “taking our licks until ’26.” It’s always cause for concern when one of the best in the industry has taken to peppering his presentations with poems and partial haikus on the state of the market.

Conspicuously missing from Knakal’s name tag was a brokerage affiliation and the evening lacked any great big reveal on his part. Turns out Bob Knakal remains unaffiliated (at least publicly) with any new brokerage he is calling home. I have some thoughts on that but will save it for another post.

In times like these, Knakal highlighted two asset classes he pays particularly close attention to: hotels and development sites as they give you both a real time read on current and future market sentiment. And this is true as hotel room rates are essentially one-day leases that fluctuate in real time reflecting market demand while development sites provide insight into developer outlook on the rental and condo market two to three years out.

JLL’s Jillian Mariutti provided a similar overview of the debt markets and was equally impressive as the other titans in the room. No doubt we will be hearing much more of Jillian in the years ahead and her pivot from derivatives trading—as Knakal described her previous work experience—to arranging and structuring real estate capital for some of the biggest owners, investors and developers in the market is a gift to the CRE industry.

The remainder of the evening involved Stephen Siegel waxing nostalgic about his rise from humble beginnings to the highest echelons of NYC’s commercial real estate industry. The conversation included a trip down memory lane (involving his run-ins with one of the great actors of all time Paul Newman who, it turns out, stood a mere 5’ 8” and had baby blues as impressive as Frank Sinatra and Siegel’s father as the icon retells it) and references to the offices he opened, the companies he acquired and his favorite deals, which, among others, included his involvement in the purchase and sale of 1290 Avenue of the Americas (twice).

Siegel also noted that the rapid rise in interest rates over the last two years will no doubt create winners and losers. The intergenerational families who fully own their assets (or enjoy a very low basis) are largely safe with capable offspring well positioned to extend their dynasties decades into the future. Less fortunate with questionable longevity are those relative newcomers who deployed capital at a time when interest rates were at historical lows and are now or soon will be required to re-finance at much higher rates while being burdened with lower valuations.

Perhaps the most memorable takeaway was Siegel’s response to a question about what asset class he would be buying in today’s market—the equivalent of a stock tip from Warren Buffet. The answer: Class B office space for $300-$400 per SF but not for conversion to residential as many may have expected but to keep as office space. This asset class, as Siegel notes, is trading at less than half of what it was before the pandemic. And Siegel believes that more tenants will return to the office over time, rents will increase and that these newly upgraded spaces will serve as viable alternatives at a 30% discount to Class A space. I tend to agree with his thesis and contrarian view but such acquisitions are capital intensive and not for the faint of heart.