Stephan Alexander Steiner is Corporate Managing Director at Savills in New York. Savills is one of the most renowned international service providers in the commercial property sector and is listed on the London Stock Exchange. Stephan Steiner was born in New York City and grew up in Austria and the USA. He studied Law at the renowned Columbia University in the City of New York, where he co-founded the Columbia Real Estate Law Society and was a three-time Harlan Fiske Stone award winner. He is admitted to the bar in New York. Today, Dr. Steiner helps domestic and international - including Austrian - clients on global real estate transactions.
The interview was made by Martin Foussek.
Martin Foussek: You grew up in Vienna and gained your training and professional experience in the United States. What differentiates Austria and the USA; what connects the countries?
Stephan Steiner: The biggest difference is the social welfare system and its impact on the mindset of the average citizen. I am often asked why Americans tend to be so entrepreneurial as compared to Austrians—the answer is “Necessity”. In the ancient world, generals would cross a river and burn the bridge behind them to make it clear to their soldiers that there was no way back – you win or you die. America is not that severe – but almost!
Our “social net” has more in common with Third World countries than with Western Europe. In the US – especially New York – people are either well off or they are poor; there are very few people in the middle. A system set up this way forces individualsto take risks that they would not take otherwise: “When you ain’t got nothing, you’ve got nothing to lose.”
Austrians, by contrast, have a comparably supportivesystem and thus not the same incentives to seek risk. Making a modest income in Austria is no great tragedy – you get good health care, a good apartment, a long vacation and probably a Volkswagen. That is a standard of living many Americans can only dream of. Why push yourself, unless you have a really good reason?
The commonality between Austrians and Americans – at least when it comes to business – is their flexibility and pragmatism. They don’t make the perfect the enemy of the good.
Martin Foussek: Has Corona changed anything in the real estate business in the past weeks and months?
Stephan Steiner: Yes! The question is: which market and over what time period?
The New York City residential market has some real headwinds. Because of Trump‘s tax reform and his Cold War with China, there was already a real downturn in the New York residential market. That is being exacerbated over the short term as people reevaluate living in a city as dense as New York. Many people are renting houses in the suburbs or leaving the New York area all together.
Similarly, Amazon and online shopping more generally had already beaten traditional retail into the ground – the corona shutdown will likely put a large number of retailers and restaurants out of business, further challenging the retail market.
Some non-core markets by contrast seem to be unscathed by this whole thing. For instance, in Montana (which is slightly larger than Germany and has just 1 million people), values are actually going up as people look for a safe place to go in case of another crisis of this type.
Theoretically, over the longer term, all the untargeted government spending and the mounting federal debt is going to force the US to print a lot of money and that will cause inflation - which should raise asset values - including real estate.
Martin Foussek: What will happen in urban development? How do you imagine the city of the future from a real estate perspective? Do companies still have space in cities?
Stephan Steiner: Cities are where young talent congregates and companies need young talent. While it is true that companies find less expensive locations around the country and around the world for non-core, fungible, positions, for the top talent they still need to come to the big cities.
Let me give you some examples: 20 years ago, UBS moved much of its operations to Stamford, Connecticut – a comparably small city of 130,000 people a 40-minute train ride from New York City. It quickly became apparent to UBS that they could not recruit the talent they needed, and they moved back to New York City.
On September 11, 2001, a group of friends sat in my apartment listening to the radio as the Twin Towers went down. We then went up on my roof to see the smoke wafting up from lower Manhattan. One of my friends said „Everyone will move out of New York after this.“ To his credit – a lot of people moved out of New York – but even more people moved in.
And then, in 2008/09, when people were losing their jobs in the thousands – that same friend told me „This is it for New York, everyone will leave.“ Again, a lot of people left, but even more people moved in.
In the current crisis the office market in New York has been pretty quiet since the corona virus shut down. That said, the big tech companies have been negotiating deals behind the scenes for more space in New York City.
Remembering my days as a kid in Vienna, the Philips Haus was a 13-story giant on the horizon when you drove up the Triesterstrasse. Now there are at least 10 buildings around it that are taller. Similarly, in New York – Brooklyn was a working class residential and industrial borough for 300 years, now it is becoming a real center of commerce where office rents are as high as in Manhattan.
So, I think that big cities will continue to grow once the World comes to grips with the realities of the corona virus. That said, to the extent smaller cities can offer much of what large cities offer at a lower cost of living, they present an interesting value proposition. In my opinion Wien offers 90% of the advantages of living in New York City at 50% of the cost. And that’s pretty good, I’d say.
Stay tuned ... Part 2 of the interview will be published soon.
The interview was made in cooperation with OWN360.