Sunday Summary: The Mamdani/CRE Honeymoon Is Officially Over

That was fast.

Not that the commercial real estate industry was expecting a bouquet of flowers and a kiss on the cheek, but since he was inaugurated in January many have been making efforts to play nice with Mayor Zohran Mamdani. The Real Estate Board of New York’s James Whelan said initial meetings with the mayor had proved positive. Steven Fulop, head of the corporation-heavy Partnership for New York City, praised him as “very savvy in communications” and “a hands-on guy.” Developer and owner Rob Speyer told Commercial Observer that Mamdani reached out to him and “engaged and actively listened.” And at the REBNY annual last month plenty of the top brokers and owners were eager to dole out friendly advice.

But this week the administration dropped two bombs.

First, Mamdani made six appointments to the nine-person Rent Guidelines Board — including the new chairperson, Chantella Mitchell — which presumably will help the mayor to make good on his promise to freeze rents.

“I’m confident that … the board will take a clear-eyed look at the complex housing landscape and the realities facing our city’s 2 million rent-stabilized tenants, and help us move closer to a fairer, more affordable New York,” Mamdani said.

Not that REBNY was interpreting the appointments as anything other than a harbinger of a freeze.

“Many of the city’s heavily rent-regulated buildings are facing severe financial distress, which continues to lower apartment supply and deteriorate the city’s housing stock,” Whelan said in a statement. “While it plays well on the campaign trail, a rent freeze is an ill-advised approach to addressing a complex issue.”

The New York Apartment Association’s Kenny Burgos also chimed in: “Any objective review of the data shows that freezing rents would be destructive to pre-1974 rent-stabilized housing, which is about to face a significant property tax increase.”

But this was always baked into the industry’s understanding of Mamdani. It was the next piece of news coming out of the administration that truly sent the jaws to the floor: flirting with the idea of a 9.5 percent property tax hike to close the city’s budget deficit. (Which is roughly double the recent assessment increase on single-family homes and smaller apartment buildings in New York City.)

The industry reacted with near universal opprobrium.

“The mayor’s inexperience in business is on display once again,” thundered Compass Vice Chair Adelaide Polsinelli. “While he attempts to pressure the governor, he appears to be missing the broader economic reality facing New York City’s real estate market. … The market has not fully stabilized since COVID. Introducing additional uncertainty at this stage will almost certainly be reflected in pricing across all asset classes.”

“City Hall should be publicly committing to a pro-transaction, pro-investment environment,” wrote Alpha Realty’s Lev Mavashev in a CO column. “That means regulatory clarity. It means avoiding rhetoric that demonizes owners. It means understanding that private capital is not the enemy — it’s the funding source for everything from affordable housing preservation to property tax growth.”

But the shock and disapproval went well beyond real estate professionals.

“Under no circumstance should we consider balancing our budget on the backs of working-class New Yorkers, especially seniors on fixed incomes and public sector workers who keep our city running,” Queens Borough President Donovan Richards said in a statement. “In this new era, Queens homeowners desperately need our city to reform its already broken property tax system — one that sees Black and brown homeowners in middle-class communities paying more than brownstone owners in the city’s most affluent neighborhoods.”

A cloud over earnings

Tax uncertainty aside, JLL had reason to be pleased on its Feb. 18 earnings call. The company boasted its seventh consecutive quarter of double-digit revenue growth, with revenue up 10 percent annually for 2025.

But … a lot of nagging questions about whether artificial intelligence will have an effect on the industry reared their heads.

“We have been acutely focused on both the opportunities and the disruption risks associated with technology, including AI, for nearly a decade,” said JLL CEO Christian Ulbrich on the call. “Relative to our industry at large, we have a uniquely informed perspective on this topic. When we assess the last 30-plus years and look across industries, a consistency has been true: The services businesses with scale, proprietary data, unified platforms and the best people outperform and win. We strongly believe this will continue to be true.”

That didn’t stop JLL investors from hurling more AI questions at Ulbrich.

Cushman & Wakefield told a similar story on its earnings call. Revenue was up 11 percent from the fourth quarter, and full-year revenue grew 9 percent, beating analyst predictions of 5 to 6 percent growth — but CEO Michelle MacKay still felt the need to soothe AI anxieties. “Think about making a five- to 10-year decision, think about the financial impact of that on a company and as to whether or not they would turn that decision over to AI — we do not believe that will be the case.”

Marketing firms aren’t the only ones sweating AI. Proptech software as a service (SaaS) providers are also getting nervous, even if they’re trying to maintain a level head.

“I don’t think AI is killing SaaS entirely,” said Zach Aarons, co-founder and general partner at MetaProp. “I find it hard to believe that the majority of companies are going to rip out their systems of record and replace them with either their own vibe-coded system of record, or that they’re going to bypass the need to have a system of record at all.”

True enough.

New York forever!

Empire State Realty Trust had a good earnings call — having signed 458,473 square feet of leases during the fourth quarter of last year and achieving 90.3 percent occupancy throughout its whole portfolio (93.5 percent leased in office alone) — but ESRT executives also announced that they’re stepping away from properties in Connecticut to focus on New York.

And we can see why. New York activity is going strong.

“This was the single strongest full year of leasing volume in Lower Manhattan in the post-pandemic period,” Colliers’ Franklin Wallach told CO in our report on Downtown office leasing. “There’s still some road ahead to get back to the pre-pandemic level of demand that was part of a narrative that started in 2011, when Conde Nast signing [as anchor tenant at 1 World Trade Center] revived Downtown. That was the kickoff of the new wave of Downtown. It’s moving back in that direction, but has not yet arrived.”

Of course, the success of Downtown Manhattan is not just an office story. For years, companies like Vanbarton Group have been diligently converting some of Lower Manhattan’s obsolete office stock into apartments. “It was around 2010-2011 … we first started investing in the area on the credit side,” said Joey Chilelli in a profile. “It was something that we saw — the ability for the neighborhood to change. We saw all of that coming, and that drove us to want to get into that downtown area sooner.”

Change is not just limited to Downtown Manhattan — last week CO reported that the New York City Department of Environmental Protection is taking 155,000 square feet of space at Innovo Property Group’s 24-02 49th Avenue in Long Island City. And LIC is also getting a 10,000-square-foot gaming arcade and a 26,000-square-foot pickleball facility.

But don’t forget Florida

How many more luxury apartments can the South Florida market absorb?

A lot. Last week National Realty Investment Advisors bagged $54 million in financing for a posh multifamily development in Fort Lauderdale.

Not to be left out, Related Ross landed $157 million in financing from Steve Tananbaum’s GoldenTree Asset Management to build a 28-story, 98-unit tower at 1865 North Flagler Drive in ritzy West Palm Beach.

Plus, the executives will be there to enjoy these temples to opulence. Alex Karp’s Palantir Technologies announced it was moving its headquarters from Denver to Miami.

And, in a bid to make it more livable and to fill vacancies along Lincoln Road, Miami Beach’s City Commission unanimously approved an ordinance allowing restaurants to offer live entertainment.

Sunday reads

Friday kicked off with a lot of people in real estate happy: The Supreme Court ruled that the Trump administration had exceeded its authority in imposing global tariffs.

This is going to mean a lot on a macro scale. And, while you’re in the macro mood, one might take some time to sit down and wonder: How is the financial pipeline? Is there too much money in the system?

“Groups that have raised capital don’t have experience lending through multiple cycles and have a real lack of experience to discern between real and perceived risk,” noted Seth Weissman, founder and managing partner at Urban Standard Capital.

And, after mulling over that, it’s worth reading a Sit-Down with Lincoln Property Company co-CEOs David Binswanger and Clay Duvall.

See you next week!