While the media paints a pessimistic picture of the current state of New York City, the truth is far more complicated and there are many reasons to be optimistic about New York today, the first of which is the strength of New York's economy.
At Commercial Observer's “The Future of New York” event, held at 5 Times Square on March 28, panelists and keynote speakers offered frank assessments of New York City's current good and bad points, emphasizing the imperative for more collaborative government at both the state and city levels.
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Following opening remarks from Observer Media CEO James Freiman and SL Green Chief Investment Officer Harrison Sitomer, the first keynote of the day saw Toby Dodd, Northeast Regional President at Cushman & Wakefield, moderate a discussion with Partnership for New York City CEO Katherine Wilde and Angela Pinsky, Head of Government Relations and Public Policy at Google.
Wilde quickly set the mood by declaring that New York City's economy is currently doing pretty well.
“Today, New York's economy is bigger than it's ever been. Our economic output is over $1 trillion a year. We're the largest economy in the world outside of Tokyo,” Wilde said, noting that even in New York, Tokyo counts the entire region while New York counts only the five boroughs. “Last year, 144 million passengers flew through New York's regional airports, a record. Tourism will be fully recovered by 2025. We've opened 44,000 new businesses in the city in the last two years, creating 4.1 million private sector jobs, a record, and we want to keep growing. So New York's problem is not the economy.”
From a technology industry perspective, Pinsky also expressed optimism.
“The technology sector is very similar to what Cathy was talking about,” Pinsky says. “We're seeing huge growth. Technology is now the fastest growing industry in the city. Google just opened up St. John's Terminal, which is now their global operations headquarters, their customer-facing services. The reason this investment has been so good for Google is because a lot of their customers are actually here. The dynamics that make New York attractive remain very strong.”
That being said, Wilde then addressed the city's expenses and costs that have ballooned out of control.
“City expenses have increased 52 percent over the last decade, and that's unsustainable,” Wilde said. “The city has a strong tax base and has been able to bail itself out over the last few years thanks to tax revenues, but that won't last if we misuse those revenues.”
Turning to the housing crisis, Wilde cited rising home prices and the repeal of 421a tax breaks for residential development, which was the most frequent theme of the day, along with the need for government relief on the issue.
“The housing crisis is a public policy issue that has over the past 50 years added design, time, approval and liability requirements to the cost of construction, causing the cost of building homes to rise to levels unimaginable in the '80s,” Wilde said.
As for possible solutions, Wilde said political participation from people in the commercial real estate industry is “absolutely critical.”
“We can't leave it to industry groups. We have to start building direct relationships between business leaders, their employees and lawmakers,” Wilde said. “There's been a bigger lack of trust between government and everyone else than I've ever seen. If we don't build personal relationships and become a resource for government, they're going to continue to do stupid things. Here's my suggestion: Take female lawmakers to lunch and make them pay 50 percent.”
The panel, titled “Economic Outlook 2024: Real Estate as the Ultimate Economic Driver,” was moderated by Sri Kasirah, president of government relations firm Kasirah, and expanded on Wilde's theme.
On the left is Ken Fisher, on the right is Zach Bernstein. Greg Morris
“I think people are just sitting on their hands,” Jonathan Mechanic, chairman of the law firm Fried Frank's real estate practice, said of multifamily development in the city. “You can't have multifamily development unless you get government incentives, except in extraordinary circumstances. We really need everybody here and everybody in the city to support our legislators and say, 'We really need these tax abatements, and this is the only way we're going to build new affordable housing.' Holding it hostage to just-cause evictions makes it very hard to get that done.”
Cassirer and Shera Wallace, senior director of origination at Nuveen Green Capital, said environmentally focused C-PACE financing could be a potential solution to some of CRE's office woes.
Greg Gomer, CFO of proptech company HqO, spoke about why free breakfast is an incredibly powerful tool for getting people back to the office, while Jeffrey Gural, chairman of GFP Real Estate, offered the ultimate solution for getting people back to the office.
As owner of Meadowlands Racetrack, Gural organized a scheme to acquire about 30 tickets each to recent concerts by Taylor Swift and Beyonce and distribute them free of charge to employees.
“People who come on Friday can enter the contest,” Gural said, adding that businesses “have to get creative.”
Following keynote addresses by Fried Frank partner Zach Bernstein and Fisher Brothers co-managing partner Ken Fisher, in a session focused on discussions between tenant representatives and landlord agents, Cushman & Wakefield vice chairman Josh Krylov said New York's burgeoning technology sector is likely to benefit from this burgeoning industry, with $29 billion spent on artificial intelligence startups last year.
Other panelists included David Goldstein, tri-state president of Savills, moderator Josh Winefski, partner at Kramer Levin, and David Falk, tri-state president at Newmark. Falk offered further optimism, noting that the vacancy rate in the city's top 45 buildings is just 8.5 percent.
“It's very healthy,” Falk said.
Speaking to Commercial Observer editor-in-chief Max Gross, SL Green Chairman and CEO Mark Holliday said the current lending environment is better than it appears.
“I've done business in much worse conditions, and I know a lot of people here have,” Holliday said. “The issue for me is not the level of interest rates, it's the rapid increase in interest rates. You can't do business on historically low interest rates alone. My primary focus right now is on new opportunities in this interest rate environment. I think this is one of the best investment environments I've seen since the early '90s.”
Paul “Tad” O'Connor, partner and co-chair of Kasowitz Benson Torres' real estate litigation practice, moderated a panel on re-envisioning Midtown, which also featured Nate Bliss, chief of staff to the Deputy Mayor for Housing, Economic Development and Workforce, Jeffrey Nelson, executive vice president of RXR's investment management group, and Dean Shapiro, head of global development at Oxford Properties, who spoke about the success of Hudson Yards, noting that it wouldn't have been possible without government support.
“None of this would have happened if the city hadn't done important things, like creating zoning freedoms and, most importantly, making major infrastructure investments like the 7 train,” Shapiro said. “When you look at the creation of new neighborhoods in New York, it always starts with active public sector activity. When you look at Midtown, the public sector has to create the right incentives, and I think this process will repeat itself.”
During the Housing Forecast panel, Ida Stoddard, senior vice president of development at MAG Partners, and moderator Basha Gerhardt, senior vice president of planning at the New York Association of Realtors, noted that despite a vacancy rate of just 1.41 percent, it takes 272 days to rent an apartment through the city lottery compared to just a few days for a market-rate apartment.
A full range of solutions, including 421a replacements and housing conversion incentives, will be needed to fully address New York City’s housing crisis.
“This is not an either/or proposal,” Gerhardt said. “We’re going to need all of these things to achieve the very ambitious housing goal of 500,000 units that the mayor and governor have set for New York City. [over 10 years]That equates to about 50,000 units per year. Last year we produced 9,909 units. This production target is also one of the highest production targets since the 1920s. So we definitely need all the tools we can.”
Also joining the residential panel were Katherine Kelman, managing director at LMXD, and Eric Ramirez, managing director and co-head of eastern originations at Acore Capital.
The final discussion of the event was on neighborhood development and the importance of the city's central business districts (BIDs). Moderated by Sarah Berman, executive director of the Avenues of the Americas Association and president of the PR and marketing firm The Berman Group, the panel featured many leaders of the city's business improvement districts: Laura Rothrock, president of the Long Island City Partnership, Regina Myer, president of the Downtown Brooklyn Partnership, Alfred Cerullo III, president and CEO of the Grand Central Partnership, and Jeffrey LeFrancois, executive director of the Meatpacking District Management Association.
Given that the BID is known for measuring broad local statistics, the panelists ended the event on an optimistic note, with Cerullo noting that December saw the district record its highest foot traffic since 2019, and LeFrancois pointing out that similar numbers were recorded in the Meatpacking District, where temperatures reached 70 degrees just a few weeks ago.
“Two weeks ago we broke all of our foot traffic records from the last three years, including fashion week in September,” LeFrançois said. “We broke those records. I'm really looking forward to summer.”