Robert K. Futterman is a recognized name in New York’s commercial real estate market. During his near 40-year-long career, Futterman has facilitated some of the most iconic real estate deals. For instance, Apple’s flagship store in Midtown Manhattan – the minimalist glass building in the Fifth Avenue shopping district.
Since Futterman’s initiation into commercial real estate working as a canvasser, at the now wound-up Garrick-Aug Associates, NYC’s commercial real estate market has gone through a host of changes. While it might not be possible to cover all the major changes that have occurred in the last 38 years, we talk about how the market has shifted in the last ten.
Back when Futterman started working, climate change was not perceived as a serious threat, online shopping was considered science-fiction, people preferred traditional cubical office spaces, and the last pandemic was in 1968. However, today, climate change is a significant concern, online shopping is the norm, employees prefer remote working, and the pandemic has greatly modified customer flows. In wake of all these changes the commercial real estate market has had to adapt.
Futterman had decided to pursue a career in commercial real estate after realizing that a career in the music industry was not the way to go, as the music industry was in a state of flux. Today, commercial real estate is going through rapid change because of Amazon, in much the same way as the music industry did because of MTV. While change had deterred Futterman in the past, the uncertainty of the market does not faze him now. He has been in the business long enough to predict and adapt to the changing demands.
The biggest change has been ushered in because of the prevalence of online shopping. Having the products of the world at your fingertips from the comfort of your armchair is one of the most significant revolutions. This has particularly impacted brick-and-mortar stores. Between 2017-19, more stores were closed compared to those during the Great Recession.
Futterman and indeed many other experts understand this change to not be destructive. Instead, they see it as a process of evolution. Futterman believes brick-and-mortar stores will not lose relevance. Moving from the digital space to a physical store is the next step for any digital brand. It allows its customers to interact with its products in a physical space, creating greater customer engagement.
It is worth noting that some experts are still ambivalent about attributing the majority of changes to e-commerce, as Class-A malls continue to perform, yet struggling businesses are closing down because of reasons that might be internal.
Shifting Work Trends
For the majority of Futterman’s career, the physical office space was the center of business. A lot of money was to be made by renting out commercial office spaces. These were dull, cubicle-laden buildings, with an equally unimpressive parking lot, and employees grinding through the 9 to 5. Now, working trends have gone through a massive change. There is an emphasis on collaboration, technology, and creative amenities at workplaces. The market is dominated by shared workspaces.
In the last two years, the pandemic has added another layer of change – remote working. According to a survey released by Partnership for New York City, only 8 percent of Manhattan’s office workers work from the office five days a week.
The pandemic did not only impact the working trends. It has had a wide-ranging impact on the commercial real estate industry, from disrupting customer flows to increases in e-commerce. The outbreak of the pandemic brought the entire NYC commercial ecosystem to a screeching halt. The famous Times Square, responsible for generating 15% of the city’s commercial revenue while only occupying 0.1 percent of the land, was empty. Its desolate streets became a symbol of the negative impact on NYC’s commercial businesses.
The lockdowns forced consumers to shift to e-commerce, with Amazon recording its highest profits. While traditional stores started to shutter down, unfortunately permanently for some.
Slowly, the market is showing signs of recovery as customer flows start to increase again. Today, 300,000 people walk through it. According to Times Square Alliance, however, this is still below pre-pandemic levels.
Industrial Warehouse Boom
The changing trends have an interlinked effect. The pandemic changed buying habits and worker preferences. These changes have also resulted in a boom for a certain type of property – the industrial warehouse.
The industrial warehouse is the response to changing working trends, as the open floor layouts create a space for collaboration and creativity, perfect for the modern office space. Warehouses also double up as dispatch centers for e-commerce businesses.
Most logistical needs for these businesses are still met by traditional industrial hubs, however, businesses are also establishing last-mile dispatch centers in smaller buildings with a more urban location. The challenge, however, is to adapt these buildings for automated storage, retrieval, and sorting systems.
Climate change has brought along its challenges. The concerns about climate change will perhaps produce the most long-lasting changes in the commercial real estate industry. Regulations are already being enacted to fight climate change. For instance, the City Council enacted Local Law 97 in response to the higher temperatures and rising sea levels. The law sets limits on the emissions of big buildings in NYC.
Climate change and the laws being enacted to fight it are creating steering investors toward sustainable investments. The standards imposed by the city ensure that buildings reduce their carbon footprint by gradually shifting away from reliance on fossil fuels. Individuals and businesses now look for green buildings, such as those that have the LEED certification by the Green Building Council, a standard for gauging the sustainability of the building.
About: Robert K. Futterman is the President of Futterman Realty. He is a five-time winner of REBNY’s Deal of the Year. Futterman has represented household brands, and large scale developers, and revitalized entire districts of New York.