New York City’s Commercial Real Estate Future at a Crossroads: Panelists
Three years after the onset of the COVID-19 pandemic brought New York City’s commercial real estate market to its knees, the Big Apple’s ongoing recovery faces possible new roadblocks that could shape its long-term business future.
Experts from the public and private sectors who spoke at Commercial Observer’s Future of New York forum March 30 at Tishman Speyer‘s The Spiral in Hudson Yards echoed the importance of the city finding solutions for improving its business climate, fostering affordable housing and reducing crime in order to assure its vibrancy. The event was hosted in partnership with the Real Estate Board of New York (REBNY).
“We should not take for granted that this city will simply recover because we have always in the past,” Bruce Mosler, chairman, global brokerage at Cushman & Wakefield (CWK), said during the first panel. “This is a moment in time where we should not take for granted that New York will just be fine. It will be fine, but provided we take the necessary action.”
Despite the crossroads New York faces, Mosler is bullish that companies will still find the city an attractive place to “scale” their businesses because the city has a large concentration of highly educated workers.
Mosler was part of the panel “Designing a Vision for the New NY: Public-Private Partnerships & Strategic Initiatives Driving the Future of NYC.” The panel also featured Scott Rechler, CEO of developer and owner RXR, and Kathryn Wylde, president and CEO of the Partnership for New York City, a business booster group. The session was moderated by Jonathan Mechanic, chairman of law firm Fried Frank’s real estate department.
Among the chief issues New York is confronting now that could shape whether corporations remain or expand in the city is crime. While down overall in 2022 compared to 2021, crime has risen in recent years since state lawmakers implemented bail reform in 2019. Gov. Kathy Hochul is seeking changes to the bail law to give judges more discretion on violent crimes, and Wylde said it was vital that moderate New Yorkers let legislators know they support the governor’s proposal.
Tackling Gotham’s affordability challenges was also a chief concern for Wylde, who noted that New York is the nation’s most highly taxed city with the largest utility and telecom taxes coupled with the biggest real estate taxes in neighboring suburban counties.
Ken Fisher, co-managing partner of Fisher Brothers, an owner and developer, stressed the importance of New York being more pro-business. Fisher said he lost a major tenant, AllianceBernstein, at 1345 Sixth Avenue when the money manager opted to relocate its headquarters to Nashville in 2018. While Fisher has added a number of amenities to his office buildings since the pandemic, he said New York needs to make improving the business climate more of a priority — from taxes to executing building permits quicker.
“There’s some perception issues right now that need to be overcome, but I think the city can do it,” Fisher said during the forum’s final panel. “I think it’s a question of working together with the private sector in the form of more public-private partnerships and not wait for a tenant to come to the city to say ‘We’re leaving unless’ and have some kind of a comprehensive plan to keep businesses here and attract businesses to New York. Because no matter what anybody says, this is still the capital of the world.”
The panel “Leading Industries & Future Offices Positioning NYC as a Global Business Hub” featured Fisher along with Jason Alderman, senior managing director and head of the New York office at developer and owner Hines; Melva Miller, CEO of advocacy group the Association for a Better New York; and Lenny Beaudoin, global head of workplace strategy at brokerage CBRE (CBRE). Meyer Mintz, tax partner at accounting firm Citrin Cooperman Advisors, moderated the discussion.
Alderman said he is optimistic about New York’s future so long as the public and private sectors work together. He noted that the city likely had “too much” office space for about 15 to 20 years, and increased hybrid working trends present opportunities to convert low-occupancy buildings into multifamily housing or perhaps create more public parks.
“We’re going to have lower-quality buildings that may get handed back to lenders and may get handed back to the city,” Alderman said. “I’m a big believer that we are going to figure this out.”
While recent data from security firm Kastle Systems shows New York’s office occupancy at 47 percent on a typical weekday, Zachary Steinberg, senior vice president of policy at landlord group the REBNY, noted that mobile phone location data tracked by REBNY show a different story. Visitation at Class A-plus buildings in 2022 was two-thirds of pre-pandemic levels in most properties, and 60 percent of the city’s office assets are seeing visits at 50 percent or above from 2019, according to the REBNY data.
Steinberg was part of the panel “Enhancing the Vital Business Districts Fueling NYC’s Economic Engine.” It also included Andrew Kimball, president & CEO of the New York City Economic Development Corporation; James Nelson, principal, head of Tri-State Investment Sales at Avison Young; and EB Kelly, senior managing director at Tishman Speyer. The panel was moderated by Paul “Tad” O’Connor, partner and co-chair of the real estate litigation practice at Kasowitz Benson Torres.
One of the major hurdles facing New York is a lack of affordable housing, panelists said. Producing more of it has been made all the more difficult due to the mid-June expiration of the state’s 421a tax abatement program. Gov. Hochul has proposed an ambitious proposal that would require municipalities to expand their housing stock by 3 percent downstate, but that has been met with stiff opposition in suburban areas like Long Island and faces an uncertain fate in state budget negotiations.
Compounding New York’s affordable housing woes was the sudden collapse in March of Signature Bank. Signature was the Big Apple’s third-largest lender with nearly half of its loans in the rent-stabilized multifamily space, according to Maverick Real Estate Partners.
“Signature, played a critical role in helping affordable housing projects move forward, so we’re going to need something to help supplement that loss,” David Walsh, managing director of community development banking in the eastern region at JPMorgan Chase (JPM), said during the forum’s “2023 Housing Forecast” panel. “The major money center banks can, and do, billions and billions of dollars of financings every year with traditional affordable housing, but it’s simply not going to keep up with the demand.”
The housing panel also featured Susi Yu, head of development at developer MAG Partners, and Travis Terry, president of urban strategy firm Capalino. Michael Zetlin, a senior partner at law firm Zetlin & De Chiara, moderated.
Maria Torres-Springer, New York City’s deputy mayor for economic and workforce development, kicked off the event with a keynote that touched on Mayor Eric Adams’ plans for building 500,000 new housing units over the decade for all income levels. She referred to the city’s affordable housing shortage as a “crisis” that requires “bold” action.
The Future of New York event also included a panel entitled “Designing for Tenant Needs & Analyzing Today’s Occupancy Rates” panel featuring Joseph Brancato, chairman at architecture firm Gensler, and David Falk, president of the New York tri-state region at brokerage Newmark (NMRK). Max Gross, editor-in-chief of Commercial Observer, moderated the panel.
Andrew Coen can be reached at firstname.lastname@example.org.