Marx Realty has been a player in New York commercial real estate for over 100 years. From its first property purchase in 1915, to the acquisition of 17 properties in 1928, its holdings now encompass 67 properties across 17 states, so it’s seen several turns in the commercial real estate market. To Craig Deitelzweig, president and chief executive officer, one thing is clear about the office sector, and it doesn’t solely have to do with the remote work era or the aftermath of the pandemic: “If you’re a commodity building, you’re in deep trouble,” he tells Fortune.
This is “really nothing new,” he adds, saying that he’s been beating this drum for the last six years, ever since he became CEO. “If you’re a commodity building, you’re toast.”
To understand what Deitelzweig means, you have to know what he means by “commodity building,” and that’s where it gets more complicated. But there’s still one inescapable truth: “The office sector is really bifurcated at the moment.”
With remote work giving way to hybrid giving way to the current push-and-pull to get employees back as much as possible, the way to do that is with an office that makes them want to be there. That means bringing in hospitality elements, Deitelzweig says, adding that his firm’s office properties have outdoor spaces, lounges, cafés, doormen, and of course the thing pretty much everyone loves: free coffee.
“That’s what today’s tenants want,” he says, and that’s why he says Marx Realty’s office properties are well-positioned, and why commodity buildings can’t compete on price because, as he put it, who wants to come into an office with low ceilings and a depressing environment? “You could be a brand-new glass and steel office building and still be commodity—there’s nothing special about it. Some of those buildings have been sold at really steep discounts.”
That’s not to say that office sector is solely at risk. Any asset could be in trouble, Deitelzweig says, if its owner has debt that’s coming due and they bought their property with the assumption that they’d have lower interest rates forever. Now that the Federal Reserve has aggressively raised interest rates in its attempt to lower inflation, and there’s debt set to mature at those higher rates, “that is a real concern for every sector in real estate,” Deitelzweig adds. As Fortunepreviously reported, commercial real estate loans that are set to mature in a time of higher interest rates and tightened credit (following stress in the banking sector) will likely result in more delinquencies, defaults, and declining property values.
‘No choice but to hand the keys back to the lender’
It’s hard to even ascertain where office property values are right now, Deitelzweig says, because hardly any transactions are happening. Part of that is because credit is tightened and stricter lending standards are at play, but also because owners don’t want to give back their properties to lenders. “It takes a while for them to reach that conclusion that this is really the best result for them,” he explains.
The economy has already begun to see how the end of an era of cheap money and changing demand is playing out for office properties, with Fred Cordova, CEO of Santa Monica–based commercial real estate brokerage and consultancy firm Corion Enterprises, tellingFortune that “we’re creating this huge class of zombie buildings.”
For those same reasons, the commercial real estate billionaire (and son of the former presidential candidate) Ross Perot Jr. suggested that “commercial real estate, overall, will slow down,” and potentially head toward a recession—raising a particular concern over New York City’s old office buildings in our post-pandemic world. “It’ll be years before we really understand the damage the pandemic did to the world,” Perot told Fortune, adding that for one thing, “it broke the habit patterns of millions of people that used to go to work every day in a real office.”
Those commodity buildings, Deitelzweig mentioned, are trading at half their purchase price or even more than that, and the better ones are still declining in value. Still, he says this can present itself as an opportunity for developers that know how to reposition an asset and elevate it to meet today’s tenants’ expectations. But that means that we are seeing office property owners and landlords returning their assets to lenders. “It really has to be twofold,” Deitelzweig says, in that more often than not this is happening with property owners that have debt coming due on their properties—and they don’t know how to properly reposition it, or they don’t want to put in the extra capital that’s needed to make that happen.
“For the assets that aren’t doing well and have debt coming due, I mean, they’ll have no choice but to hand the keys back to the lender, so there will be more of that happening,” Deitelzweig says.
That can mean a few different things for supply. For the commodity types of spaces and buildings, Deitelzweig says there’s already too much supply, so there’s going to have to be some adjustment. Maybe that’s transforming commodity buildings into hospitality-infused office properties—or maybe tearing them down and turning them into parks (which is exactly what Perot Jr. told Fortune he’d do). Why not convert those obsolete offices to housing, I asked, like many others, thinking it could potentially help the city’s housing crisis.
“On the properties that I’ve looked at, it really doesn’t make economic sense, and it’s more of a pipe dream,” Deitelzweig says. “Because really, if it doesn’t work for office, it doesn’t work for residential, usually, as well, and the basis would have to decrease so dramatically for those economics to make sense.”
Deitelzweig joined the company as its president and CEO back in 2017. His main focus? Value-add office investments in three core markets: New York City, Washington D.C. and Atlanta and repositioning Marx’s entire portfolio. They’ve since adjusted their focus to New York City and Washington D.C., but they still “very much believe in office repositioning.” Deitelzweig tells Fortune that their portfolio (which includes office, retail, and a little bit of residential) is positioned well, with no debt coming due in the next two years. Take Marx Realty’s 10 Grand Central property (a 35-story office building) in New York, Deitelzweig says they’ve leased more space in that building in the last 12 months than all the buildings around them combined.
“Are you trying to get me to give away my secrets?” Deitelzweig said, laughing, after I asked what’s missing. He then said that some of it is location, as in being near transportation, because no one really wants to take that second or third train to work. But it’s also about being thoughtful with your design. The best hotels can’t be replicated, and that’s how Marx likes to think of offices. Nevertheless, for those assets he mentioned that won’t have a choice but to turn in the keys, lenders will look to companies like his for help, which Deitelzweig says is already happening.
“I think it’s part of a cycle, and I think it’s a very healthy thing sometimes for every commercial real estate sector to sort of rethink, step back, and reimagine what the product could look like,” Deitelzweig says.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
