10 Things to Watch Out for in 2019
John Jordan | January 2019
WHITE PLAINS—While I do not profess to possess the prognostication skills of the “Amazing Kreskin” or “Carnac the Magnificent,” I thought I would share my thoughts with the Real Estate In-Depth readership on the top stories/issues I believe could have an impact on the commercial, residential real estate and capital finance markets in the Hudson Valley region and elsewhere in 2019.
Editor’s Note: I promise not to use the words “Time will tell” in this forecast article!
#1. SALT Cap—There has been much speculation on just what impact the $10,0000 cap on state and local taxes will have on residential sales in the NYC/Hudson Valley market this year. I believe it will take some time to measure whether the SALT Cap will depress home sales and if so, by how much. An indication could begin with the release of first quarter 2019 sales and in particular how many homeowners decided to put their properties on the market after feeling the impact of paying taxes due in April.
However, if the stock market continues to be volatile and interest rates ratchet higher (see #3) a true gage of the SALT Cap’s impact might come from conversations with Realtors, mortgage brokers and sellers in the coming months.
#2 President Donald Trump vs. Democratic House of Representatives—While the GOP maintains control of the U.S. Senate, the Blue Wave in November wrestled control of the House of Representatives to the Democrats. With subpoena power and a reported 17 investigations underway into the Trump Administration, Trump Campaign and the Trump Organization, court challenges and government gridlock could become at least a possible result of the divisive politics that now exists. At press time the federal government remained in a partial shutdown over the President’s border wall and House and Senate Democrats vowing to not provide any funding for the wall the President has stated will be paid for by Mexico.
#3 Home Inventory/Rising Mortgage Rates—Realtors have stated repeatedly in 2018 that while the residential market in the Hudson Valley remained strong, the dearth of available inventory depressed sales and frustrated prospective homebuyers. If the SALT Cap is as impactful as some have feared, it will probably lead to a marked increase in home inventory levels in New York City and the Hudson Valley. In addition, will rising mortgage interest rates and rising prices lock out first-time homebuyers from the market? Also, if that is the case, can Realtors convince Albany lawmakers to finally pass legislation geared at helping first-time buyers in New York State?
#4 Downtown Revitalization Projects—As some polls show elevated fears of a possible recession in 2019, the timing of when some major redevelopment projects in the Hudson Valley break ground could be critical. Prior to the last recession, a total of $3 billion of redevelopment projects in the pipeline in Downtown Yonkers failed to break ground and a major residential project by the White Plains railroad station (that was to be financed by Lehman Brothers) was delayed years before breaking ground.
The multifamily development boom has taken hold throughout the region, but are we approaching a time when investors become hesitant to finance these projects with a potential recession on the horizon?
#5 HGAR-LIBOR New Regional MLS—Sometime this year, a new regional multiple listing service will begin operations.
Last September, the Hudson Gateway Association of Realtors and the Long Island Board of Realtors announced that their efforts to create a consolidated regional Multiple Listing Service that would benefit approximately 40,000 subscribers cleared a significant milestone. The two associations have stated that they expect the new yet-to-be-named MLS will begin operations sometime in 2019.
The two largest Realtor associations in New York State reported that their respective Boards of Directors and the boards of the Hudson Gateway Multiple Listing Service, Inc. (HGMLS) and the Multiple Listing Service of Long Island, Inc. (MLSLI) signed an extensive operating agreement last year that establishes the foundation of the yet-to-be-named new regional MLS.
The new regional MLS will be the largest operating multiple listing service in New York State.
Officials with HGAR and LIBOR said the new MLS would include listings from the existing HGMLS service area, as well as from the MLSLI region that serves Nassau and Suffolk counties and the boroughs of Brooklyn and Queens.
#6 Proposed STEM High School at Former IBM Somers property—Back in September, Real Estate In-Depth was first to report that Evergreen Ridge, LLC of Stamford, CT presented a plan to the Somers Town Board that if approved would involve the adaptive reuse of the 1.2-million-square-foot former and now vacant IBM campus in Somers into a STEM high school geared at attracting top students from across the country.
The initial plans call for significant interior renovations to the five-building complex to convert it into a school for grades 9-12 that would focus on STEM (science, technology, engineering and math), as well as the arts. Evergreen officials say the firm hopes to open the school for its first class in the fall of 2020.
If the STEM high school project secures all approvals and lease negotiations are finalized, the lease transaction and the subsequent adaptive reuse project would be the largest of their kind in memory in Westchester County. The largest lease and eventual subsequent adaptive reuse of a property in Westchester was the sale/leaseback of the Reader’s Digest headquarters property in Chappaqua in late 2004 to Connecticut-based Greenfield Partners and Summit Development. Eventually, Reader’s Digest moved out of the complex, that has since been converted to a mixed-use project featuring office, residential and retail uses.
The IBM Somers-STEM high school deal would have a dramatic downward effect on the Westchester office vacancy rate if it moves forward. The former IBM Campus in Somers was withdrawn from the market in the third quarter of 2018, causing a substantial drop in the county’s office availability rate from 21.9% to 17.8%.
#7 Indian Point-Power Supply—As the closing of Indian Point power plants get closer—scheduled for 2021 and 2022, conflicting reports have been released on whether the region will have sufficient power to replace the nuclear power facilities owned by Entergy. Also, the economic impact to the region and particularly to the Buchanan area will also come in to clear focus. Expect the plant closures to garner more press and attention from the public and politicians this year.
# 8 Gaming in the Hudson Valley/NYC—The opening of the Resorts World Catskills Casino resort has provided a major boost to the Sullivan County economy and the surrounding area, however, the facility’s ownership has reported significant losses since the doors first opened. With the opening of new hotels and the adjacent water park resort, it is hoped that the new casino’s fiscal performance will begin to stabilize.
Meanwhile, MGM is in the process of finalizing its $850-million deal to acquire the Rooney family’s Empire City Casino in Yonkers. The New York State Gaming Commission postponed “until further notice” a meeting scheduled for Jan. 3 that was to include consideration of MGM Yonkers, Inc. to conduct harness racing, simulcasting, account wagering on racing, and video lottery gaming at Yonkers Raceway. The new ownership eventually hopes to gain state approval to bring full casino gaming to the property, but that competition is still years away.
#9 Westchester County Finances—The Westchester County Board of Legislators on Dec. 10 approved a $1.94-billion budget for 2019 that closed a $32-million budget deficit. The county faces a projected similar sized shortfall in the coming fiscal year. The budget included a 2% increase in property taxes and also a one-time revenue raiser of $23 million to transfer the county-owned parking lot at the Westchester County Center to the Westchester County Local Development Corp. That transfer has yet to be approved by the LDC.
If the projected shortfalls are accurate, County Executive Latimer will have to look for new and imaginative ways to raise revenue and reduce costs.
#10 Major Route 17 Projects—Construction continues at the LEGOLAND New York project in Goshen, as well as on the major road infrastructure improvement project adjacent to Woodbury Common Premium Outlets in Central Valley. Reports also indicate that Great Wolf Resorts is also interested in possibly locating a facility in Orange County. One of the sites it reportedly is considering is the former Camp LaGuardia property on the border of Chester and Blooming Grove.
Expect a push by the Orange County Partnership and others to have New York State significantly increase road infrastructure investment in the Route 17 corridor, even possibly calling for a costly third lane in each direction from Harriman to the Monticello exit where the new casino is located.
HONORABLE MENTIONS: Federal Opportunity Zones’ impact on the region; the benefits of the Amazon’s HQ2 project in Long Island City to the NYC economy; a possible new Westchester IDA employment policy and its impact on development in the county; future toll charges on the new Tappan Zee Bridge (Mario M. Cuomo Bridge); future uses at the Nyack College and Novartis properties in Rockland County; any resolution to the ongoing litigation regarding the CPV Valley Energy Center in Orange County and continued adaptive reuse projects along the I-287 corridor (Platinum Mile) in Westchester County.