CIO Scott Martin Interviewed on Fox Business News 6.2.21, Part 2
Program: Cavuto Coast to Coast
Station: Fox Business News
NEIL CAVUTO: Want to get reaction to all of this with Jared Levy and Scott Martin, you know, Jared and Scottie, think about it, commercial rents are going to continue going down. I mean, I guess they’re anticipating a comeback as businesses and people return to those businesses. But this might be more the norm, what we just heard. So, Jared, what do you think?
JARED LEVY: Yes. So Manhattan’s a kind of an unfortunate but now fortunate microcosm, right? Median rents in that city dropped to twenty seven hundred dollars in the first quarter of the year. That’s the lowest of all time. And you got to think about Manhattan. Right. It’s kind of really need a lot of very small, very expensive places. A lot of things are vertical. So for retailers, not really sort of a great place to be. Now, that’s not to say that there can’t be a rebirth like the one we just saw. The issue is how do we fill up all those big high rises that are now being vacated by big companies moving elsewhere where there’s lower taxes, lower cost of workforce, et cetera. So, you know, another interesting point, Seattle just dethroned Manhattan as the number one spot for foreign investment. So I’m not ready to buy in on Manhattan Persay. But I will say that real estate across the U.S. is seeing the commercial real estate is seeing a huge change in evolution. Sam Zell just dump three point four billion in a mammoth mammoth real estate investment group. I believe they’re a huge industrial operator. So they service like Amazon’s people like that. So I think that’s where the big money to be made in commercial real estate’s going to be Manhattan. Who knows? But but interesting to say.
CAVUTO: Yeah. And you think about it, too, Scott, to Jared’s point, I mean, when when people do return to their offices and a good many will, they’ll be spread out a little bit. They’re not going to be packed like sardines like they had been before. We don’t know all the details, but we do know enough that the demand for still more office space is going to be cold for a while. I’m just wondering how this plays out in cities like New York.
SCOTT MARTIN: Well, I would add Chicago to that list, my hometown, Neil, which is suffering, too, I mean, we’re looking at Chicago occupancy rates near our office in downtown Chicago, less than 20 percent, and with no end in sight, frankly, of people coming back or deciding to. And so I think that’s that’s really interesting takeaway. You know, there’s other cities, though, Dallas, Denver, that have weathered some of the corporate real estate difficulties much better. And so those will probably bounce back faster. But, yeah, Manhattan, San Francisco, certainly Chicago. You have the impact, as Jared said, from the vertical dearth of people coming back with respect to some of the corporate office buildings being empty and then also the mom and pops or even just the retail that was built around, say that corporate infrastructure, that that’s at risk now, too. So really, I think it depends on where you go and kind of what sectors you’re in. Industrial real estate has been an area we’ve done a lot of investing in because of the expansion from Amazon and companies like that. But corporate in some of those long famed leading cities of the United States really looks to struggle here going forward.
CAVUTO: Would either of you look at real estate investment trust in this environment, some of them have been beaten down quickly, if I can. Gentlemen, Gerard, to you,
LEVY: the answer is yeah. You’ve got to be really careful here. Remember, here’s the key to investing in real estate. If you can’t jack up your rents enough to meet inflation, there is no protective measures there. The good thing is there’s a lot of preferential tax treatment. But again, I would look at I like multifamily in some cities, but certainly I would stay away from high density areas. Like Scott just mentioned. The big metro areas would be a place that I would avoid in general in terms of reinvestment.
CAVUTO: Scott how about you, REITS, any interest in them?
MARTIN: Yeah, yeah. Multifamily Neil and Florida, even some residential housing expansion that’s going on outside of cities like Nashville and Denver, as I mentioned, that are doing very well through the pandemic and have a lot of growth ahead of them.
CAVUTO: All right, gentlemen, I want to thank you both very much, Jared and Scott, on all of this.