Behind the uncertainty in New York City real estate

Robert Lapidus, president and chief investment officer of L&L Holding Company LLC of New York City, told an audience of nearly 300 Lehigh students recently that the best way to establish their careers is to help their employers make money.

Make it a mutual ‘using’ of one another, he said. I’m going to use you for your inexpensive labor, and you’re going to use me to learn as much as you can. That’s an invaluable education. That’s an education you’ll be able to bank on.

The advice was part of a straightforward and sobering presentation by Lapidus, a Manhattan real estate mogul who spent two days at Lehigh as the featured guest of the Stacom Family ire@l Speaker Series. His presentation last week, titled New York: Past. Present. Your Future, gave students an insider’s view of New York’s unpredictable commercial real-estate market.

The lecture also encouraged students to make the most of an unstable economic environment by expanding their skill sets and simply working hard.

If you can be one of the people who help to make your employer some money, your ability to get a job goes up exponentially, he said. Think about it the way the owner of a business would think about it. Because when you need to start thinking about cutbacks, you’re not going to cut the person who’s making you money.

Where we are, nobody knows

During a slide presentation, Lapidus explored New York’s real-estate sector before turning to the topic of unemployment and other consequences of the economic downturn.

To Lapidus, things are as bad as they seem, and often worse. He believes the U.S. is experiencing more than the 10 percent unemployment rate headlined in the media.

And while the financial services industry is relatively small—more people are employed in New York’s legal, accounting and advertising sectors, for example—its ripple effect is significant because the industry is responsible for so much capital flow into the city.

The good news is, there won’t be any development for a while, so there will be a chance for it to bounce back, Lapidus said, adding, Professor Thode said he’d like for me to be optimistic. Well, I’ll be positive. I’m positive that the market is not good—that’s as optimistic as I can be.

But that unsettling picture opens up opportunities for students hungry enough to find them, he countered.

The bottom line is that the rules have not been written yet. You all can be part of coming up with those rules and becoming part of the solution. Two years ago, I thought I knew what I needed to know about my business. Today, I’m not so sure, so you’re in the same boat as me.

A new business model

In regards to New York’s struggling real-estate market, Lapidus attempted to put things in perspective.

With 400 million square feet, New York offers the largest office real-estate market in the country— two-and-a-half times larger than Chicago, the country’s second-largest market. And the 42 million square feet of unused office space resulting from the slumping economy represents more square footage than all the office space, occupied and vacant, in Philadelphia.

In this unusual environment, Lapidus admits, his tenants have the upper hand.

It’s really a tough time while this descending of fundamentals continues, he says. The net effects of rent, right now, are as bad as I’ve ever seen them.

His message? There are always opportunities around every corner.

It’s up to you to make the most of them. Put yourself out of your comfort zone and learn a skill that’s going to make you more competitive, he said. When someone comes to work for my company, as an owner of a business, I ask myself, ‘Is this person overhead?’

Various spheres of influence

Students who distinguish themselves during their college careers are heading into the job market with an advantage—especially those who understand the changing global dynamics of business, Lapidus said.

It’s not just about the U.S. It’s not just about speaking English, he said. There are various spheres of influence around the world that are going to have an impact on your lives.

Stephen Thode, director of Lehigh’s Goodman Center for Real Estate Studies and the ire@l program, says that’s a valuable bit of advice for students, regardless of their majors.

There has never been a better time to study real estate than right now, said Thode, an associate professor of finance. With profound challenges come profound opportunities. Students who prepare themselves well to meet those challenges are likely to flourish as the market improves.

Photo by Douglas Benedict