By Orlando Lee Rodriguez
The 117th annual Real Estate Board of New York banquet at the Hilton New York Hotel last Thursday night was one of celebrating the accomplishments of the industry’s movers and shakers.
But for the first time in 12 years, this year’s gathering had a tone of muted concern surrounding the uncertainty of who will lead the city after Mayor Michael Bloomberg’s term comes to an end.
An advocate of skyline expansion, the Bloomberg administration has been a friend to the development community. But as the clock ticks down to December 31, one of the issues taking center stage is the proposed re-zoning of East Midtown, which many developers feel is necessary for New York to compete in today’s office market.
“I think the idea behind the Midtown East rezoning is fantastic,” said Robert Knakal, chairman of Massey Knakal. “If you look at a skyline picture of midtown Manhattan and then look at Hong Kong, Singapore and Dubai, over the last 50 years they’ve changed dramatically. New York hasn’t changed that much. The average office building is over 70 years old. We need new office buildings in midtown Manhattan.”
Presently Class A office space is at a premium throughout the city and although new inventory like the World Trade Center, Hudson Yards and Manhattan West will become available during the next administration, demand is still predicted to outweigh supply. According to data compiled by Colliers International, Midtown South has the lowest vacancy rate in the nation, at 3 percent. Midtown North is not too far behind with a 7 percent vacancy rate.
Now with time running short, the question is whether there will be enough time left for the East Midtown re-zoning measure to pass through the various committees and interests on the council. Not all members or candidates are in favor of the plan.
Former city comptroller Bill Thompson, who was in attendance Thursday, called the re-zoning idea a “recipe in the long run for disaster” at a Municipal Art Society event in October. The MAS has listed 17 buildings in Midtown East that should be protected from re-development. In contrast, Public Advocate Bill De Blasio, who also attended, has written a letter in support of the plan on behalf of the hotel workers union to the Department of City Planning.
Other attendees included former MTA chairman Joseph Lhota, police commissioner Raymond Kelly and City Council speaker Christine Quinn, who in many circles is considered to be the Democratic front runner.
In regards to the Midtown East rezoning plan, City Council Spokesman Justin Goodman indicated that the speaker does not publically comment on ULURP applications. However, Quinn did tell Real Estate Weekly that the city should assist the industry rebuild in the aftermath of Huricane Sandy.
“The city should do everything in its power to help make sure that the real estate community can finance projects which will rebuild our city, create jobs and stimulate the economy,” Quinn said. “We must also further streamline the city’s permitting approval process to eliminate red tape and ensure that the projects that are ready to begin, do so as soon as possible.”
Another major issue on the minds of industry attendees was the tax burdens facing building owners. Many have complained that rates which are estimated at 50 cents on every dollar cannot be forced any higher without having a negative impact.
“The health of New York City and its real estate industry are inextricably linked when almost 50 percent of every tax dollar collected comes from real estate,” said Mary Ann Tighe, the outgoing chairperson of REBNY and the CEO of the New York Tri-State Region for CBRE Group, Inc. “The issues that are important to our industry must be important to the next mayor, or many of the city’s vital functions – police, fire, education and so on – will be under extreme budget pressure.”
“Let’s start with real estate taxes that need restructuring, because, currently, the system is opaque and shot with inconsistencies. A program must be created that stimulates new construction by making taxes on new office buildings predictable, so that such properties can be financed and tenanted,” she said.
Tighe told Real Estate Weekly that the new chairman of REBNY, Rob Speyer, president and co-CEO of Tishman Speyer, is planning to set up meetings between the candidates and REBNY’s executive committee in the coming months.
“Any candidate for mayor who seriously analyzes the needs of the city and the goals of the real estate industry will recognize that the support of our industry is vital for his or her success,” said Tighe. “I’m looking forward to those meetings to see what the candidates’ understanding of the real estate industry’s issues are and how those issues would fit into their agenda.”