Broken Arrow Property Advisory to visit USA

I am just about to head to the USA for my annual business trip and it couldn’t be a better time to go to NYC for property, Omaha for investing and San Francisco for business. I’ll add Los Angeles to see the impact of the rebuilding challenge because of the fires.

Apparently pretty much everything will be made there in the future as the country tariffs its way to success on the global stage. Who knows what this US strategy will bring but it sure has shaken up global markets. I’m keen to hear Warren Buffett’s views firsthand where he has previously stated that the impact of tariffs “is an act of war, to some degree”.
 
From a property perspective I’m interested in the similarities and differences in the commercial and residential markets. That’s where the learnings are, and I take stock of the comparison and feed that information back to my clients, so they are better informed and aware of risks and opportunity.

What is indisputable is that Aussies value residential property and Americans value the stock market. Because of these sentiments both markets are dominant and important to the health and stability of both countries.
 
The fallout of the banks and property owners in the US has been severe, a disaster. Not so here and perhaps that’s the difference in how our countries’ embrace the lending responsibility.
 
In Australia commercial property has not experienced the dire falls of the US. That said though few properties have transacted, and investors are complaining that their invested funds are trapped. Valuations show a slow decline in what feels like death by a thousand cuts.  At some point the truth will come out like the definition of a “Code Red” did in the movie - A Few Good Men. Remember some of those great one liners, “I want the truth”

and as Jack Nicholson replied “You can’t handle the truth”.

That’s why I need to go and find out, first-hand and to asks questions and listen to the best. Things are tough because values ramped up quickly before COVID and then went into a trading halt. The last 5 years has been about learning and adapting.
 
Whilst adapting we spawned Work from Home (WFH). The forces against WFH refuse to recognize that our workforce is larger because many more women have an opportunity to get work. Today we have a very high employment participation rate and WFH has been the reason. We can see that both office based, and home based simply work if you have technology to support it and we do. Whilst good for the economy its bad for office owners.
 
The problem for Australian owners of commercial real estate is that they haven’t figured out a new model to capture space where people can work and live. They still want business to solve the problem, and they are happy to give away most of the lease deal for the easy solution. Unfortunately for those who don’t own a trophy building there is no easy solution. That’s why my trip is so relevant. The people I meet imagine and create solutions.
 
This year I head off optimistically just as Australians feel like the cliff is close and brought closer by global tariffs.  As they say when America coughs, we catch a cold.
 
No matter what Aussies think we are not cultivating technology, encouraging business to flourish or solving real property challenges. For once we seem completely confused and yet we have a shortage of homes and 10 years’ worth of purchasing and renting demand. New York will show me the trends.

Property 

I am keen to see the largest US office to residential conversion in New York at 25 Water Street, see below. What a transition from pure office to 1,350 apartments.

I’d also like to see the progress with the Flatiron building and its conversion from an office building with a long and rich history in publishing to about 60 luxury apartments. I love Flatiron, the building and the district.

I’m keen to speak to my colleagues about the market.
 
The good thing about the USA is that optimism is always nearby, and I enjoy watching problems solved quickly. That NYC retail market corrected quickly because New Yorkers understand demand and cashflow. The thought of ripping up pre COVID leases and doing rent deals based upon revenue, whilst logical to me is not part of Australian property psyche.
 
On the demand side they needed those 66 million tourists back and in a hurry. New York sets the tone for real estate there is no better city in the world in which to be in business. I also want to see what is happening in the luxury retail market.

Investing

After New York I head to Omaha to listen to the Oracle speak. Buffett is now aged 94. This year he will have a lot to say, and I sense the excitement. Expect tons of See’s peanut brittle to be consumed over that special weekend Annual Meeting
 
Firstly, Warren Buffett has proudly stated that Berkshire Hathaway has paid $26.8 billion to the IRS in tax last year or 5% of what corporate America paid. He is proudly American.

Secondly, his war chest of US$335 billion is well positioned should world economies head into recession. Expect Berkshire Hathaway to be one of the few buyers if everyone is selling. So, Nebraska should give me a good sense of the equity markets and investing.
 
Finally, he achieved a 25.5% return for 2024 which is very strong. Net income rose $10 billion to $47 billion for the year over the 2023 period. Normally returns of that size are linked to tremendous risk. Spectacularly, this improved his compound annual gain for the past 60 years to 19.9%. Under every metric that is a phenomenal record.

Business
 
From Omaha its off to San Francisco to work out what is happening in business. Technology is in full swing now and the Magnificent 7 companies are now mature businesses. When I was last there my colleagues felt that they alone would determine the success or failure of the office sector. Whilst they were contracting then, I need to hear if that trend is turning or if it continues.
 
I also want to see the impact of the new companies in AI on office space in the market, which last year was the green shoots expectation.

High profile developer, Jay Paul Company has a new plan for its CityView development in downtown San Jose, swapping out some office buildings for an office-to-resi conversion, a brand new residential tower and retail. The company sees multifamily development delivering stronger returns than aging office properties.
 
Further up the West coast, our Commonwealth Bank has committed to a dedicated Tech Hub in Seattle. Over the next 12 months, 200 CBA staff will rotate through the tech hub to learn from Amazon, AI research company Anthropic, H2O Generative AI and Microsoft.

Once I leave San Francisco I call in on Los Angeles. LA has had a tough time with the writers and actors strike and then the fires. I’m interested to understand the appetite for locals to stay and rebuild or go and fight another day.
 
This should be another eye opener so let me know if you have any specific requests and I will aim to get those questions answered.
 
I’m overseas from 26th April to 12th May 2025.