Shaun Pappas on New York's Real Estate Market Evolution

Written by:

Steve Marcinuk

Date:

01 Apr 2025

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“We’re seeing renewed activity both on the buyer side and on the development side this year. There’s been a strong appetite for development projects and the market seems to be trending upwards,” explains Shaun Pappas, Partner at Starr Associates.

After years of volatility following the pandemic, New York’s real estate market is showing promising signs of a sustainable recovery. In a recent conversation with Shaun Pappas, whose boutique real estate law firm has a front-row seat to New York City’s property landscape, we gained valuable insights into how developers and investors are navigating this dynamic environment.

A Specialized Development Practice

With a proven track record of registering projects exceeding $50 billion in value, Starr Associates stands as a leading New York real estate law firm, offering multidisciplinary legal expertise across all stages of development. “New development is our bread and butter,” Pappas explains. The firm currently represents approximately 220 active development projects throughout New York City, serving clients ranging from household names to emerging developers trying to break into the market.

The firm has doubled in size over the past five years. “We handle acquisitions, construction, sales, contracts, residential and commercial condo creations, and leasing for retail, restaurants, office and more,” says Pappas. “We are fortunate to be the go-to advisors when our clients find an interesting deal.”

Reimagining Space: Office-to-Residential Conversion

As the conversation shifts to current market trends, Pappas highlights one of the most significant opportunities emerging in the post-pandemic landscape: the conversion of underutilized office buildings into much-needed residential spaces.

“We have clients converting both boutique and large scale office buildings into residential product,” Pappas explains. This trend addresses two critical-and much discussed-issues: excess Class B and C office inventory and New York’s perpetual housing shortage.

The regulatory environment is increasingly supportive of these efforts. “In many pockets of New York City, the zoning laws have become more relaxed with the intention of incentivizing construction for more homes,” Pappas notes.

Beyond regulatory considerations, the physical conversions present their own challenges. “Inherent in conversion deals are challenges with construction, infrastructure, and costs. Sometimes the ROI just isn’t there and creativity comes into play to make the deal pencil,” Pappas observes.

Market Response: Efficient Design and Localized Solutions

As developers respond to changing market demands, Pappas observes an emerging trend toward more efficient use of space — a strategy that varies by neighborhood and allows developers to maintain competitive pricing.

“We’re seeing clients build more efficient apartments right now whether it’s smaller one bedrooms or smaller two bedrooms with a lower price point with quality finishes,” Pappas explains. This approach isn’t just about squeezing more units into a building; it’s about creating targeted solutions for specific submarkets.

“I have certain clients that, depending on what pocket of the city you’re in, will tailor the unit size to that area, depending on what they believe the needs are,” he continues. “We’re seeing in certain areas of Brooklyn, they’re building more efficient Studio, One and Two bedrooms. In certain areas sub 14 Street, the one bedrooms and two bedrooms are just a little smaller on a square foot basis, to keep the prices in a competitive range.”

The Urban Revival: Commercial Activity Fuels Residential Demand

While headlines often focus on residential real estate, Pappas emphasizes that commercial activity serves as both an indicator and driver of overall market health. His firm’s experience suggests a robust revival underway in key commercial segments.

“We’re doing a lot of restaurant, membership club and retail leasing,” Pappas reports. “New York City commercial leasing is quite active compared to the immediate post-pandemic market.”

A surge in commercial activity fuels residential demand, creating a self-reinforcing cycle that enhances New York’s desirability. As Pappas noted, “increased dining, entertainment, and experiential retail draw people to the city, boosting residential interest and property values.”

Commercial tenants are uniquely positioned to capitalize on this resurgence. Pappas explains that both landlords and tenants can secure favorable lease terms during this period of historically low rents. By locking in these rates now, tenants can benefit from stable, advantageous rents as the city continues its recovery.

Workplace Evolution: Rethinking Office Space

The conversation naturally turns to the office market, where significant changes in tenant preferences are reshaping the landscape. As companies navigate return-to-office strategies, quality and amenities have become essential differentiators.

“The build outs are very different than they used to be,” Pappas observes. “Offices are a bit smaller and more efficient. Businesses and their talent want space for amenities. Buildings with amenities achieve significantly higher rents.”

This emphasis on quality extends to buildings of all vintages. “Even if it’s an older building, the interior renovations that these landlords are putting together and building out are beautiful,” says Pappas. “If you’re going to come back to the office, at least you’re coming back to something that’s pristine.”

Landlords are responding with generous improvement allowances to attract and retain tenants. “Either TI for tenants or ‘we’ll build it for you, you tell us what to do, and we’ll give you a nice budget,'” Pappas observes.

Looking Forward: Stability as the Foundation for Growth

As our conversation concludes, Pappas emphasizes that after years of volatility, what the market needs most is a period of sustained stability to reach its full potential.

“I’m looking for a sense of excitement and activity in the market which has been up and down over the last few years,” he says. “We’re really looking for consistent activity to drive continued development.”

The fundamental supply-demand imbalance that has long characterized New York’s housing market provides the foundation for optimism. “The supply is down,” Pappas explains. “In New York City, there’s just not enough quality homes both for-sale and for-rent. Generally, when this happens, the markets get more active and more competitive resulting in deal flow, and spuring the next wave of development.”

After weathering years of uncertainty, there’s a collective desire across the industry to move forward that Pappas captures succinctly: “We all lived through the last five years. So it’s kind of like, everybody thinks things are okay, so if not now, when? You just get back in and you start doing it.”