NYC Retail Real Estate Plunging Fast

Despite many, many denials from the Bush Administration over the course of last year, the recession has been upon us for quite sometime. The jolt from the stock market starting in September was only a part of what has been going on. Americans had been feeling the pinch and the pain for a long time now and it showed in retail sales this past holiday season. Due to that drop in sales, many stores will be going out of business and even in Manhattan, the evidence will be all around us as we walk through the streets.

From The NY Times:

“The national retail scene is a mess, and it is going to impact us,” said Gene P. Spiegelman, an executive director in Cushman & Wakefield’s retail services group. He predicted that demand for space would soften throughout the city’s many shopping districts this year, and in fact, landlords in some of the trendiest areas have already begun lowering asking rents.

Industry experts say they also expect the pace of store closings to pick up in February and March, after retailers have tallied the cost of exchanging unwanted holiday gifts for cash.[...]

Suddenly, retail brokers say, this is shaping up to be one of the best tenants’ markets in years.

“Tenants definitely believe that the market has flipped in their favor,” said Michael J. Hofmann, a senior managing director at Colliers ABR, who represents both tenants and landlords. He said the tenants he was working with were negotiating more aggressively with landlords. Their offers, he said, “are at levels that we never would have proposed six months ago.”

Landlords have gradually begun lowering asking rents, even in some of the city’s most desirable shopping districts. For example, average asking rents fell by 3 percent last year on Madison Avenue, ending the year at $1,057 a square foot annually. And asking rents fell by 5 percent in SoHo, to $263 a square foot, according to Cushman & Wakefield.

Even in the upside of this news, there is still misery and sadness. Even with those lower rents, finding the credit for business to help move into new retail space is practically non-existent. It is definitely a buyers'/renters' market, but having the cash or capital to make the deals is tough considering the economic environment we are in at the moment.

Who Benefits From A Bloomberg Third Term

With a fresh poll that shows a slight majority in favor of a third term for the current Mayor, I believe that we haven't been able to get the message out about what is going on here. Within a year's time, New Yorkers are going to know what Bloomberg is up to here. He claims he knows his finance and can guide the city through these rough fiscal times, but who exactly is he taking by the hand now and through 2013 if he is re-elected?

From The Real Deal:

Many in the New York real estate community are in favor of Mayor Michael Bloomberg serving a third term as mayor. Developers, landlords, investors and brokers like Bloomberg because he's been a pro-business, pro-real estate mayor, and want a businessman in charge of the city during the Wall Street crisis. Developer Alex Sapir said, "Let's keep him forever"; Howard Lorber, chairman of Prudential Douglas Elliman, said, "I can't think of anyone who's done more for New York … in my lifetime"; and Donald Trump said, "Any time I see Michael I say, please run."

These are the people that want Bloomberg to stay another term and when that term is up maybe they'll extend the law for another four years. Who really knows? This is a slippery slope if I've ever seen one. Everyone except for regular New Yorkers wins here. The Council will now be able to qualify for generous pensions if they stay more than ten years in office, the Mayor holds onto his power and the wealthiest among us get a guy who is more than willing to bend the city over and allow the Ellimans, Tishman Speyers and Trumps to recreate Manhattan and the surrounding buroughs as they see fit.

Meanwhile, those of us who have lived and worked here for years or decades slowly get pushed out by rising rents and real estate prices. Sure, the numbers are down right now for apartments around the city but that downturn won't last long, especially in Manhattan. In a year or two, when prices rebound the developers and real estate tycoons will be reaping more profits while the rest of us just try to hang onto a place in the city, though many have already folded and moved out to PA.

So if you want to be chased out of your city by rising costs, then a vote for Bloomberg and term limit extensions is one for you.

Spitzer Is Back To Work

No, thankfully not for the State of New York. Eliot is back from being hidden away upstate to do what it seems his wife always wanted him to do. No more fighting criminals (while being one in a way) or trying to fix the tangled web that is Albany. No, the ex-Governor is going to take over the family business for his ailing father.

From The Gothamist:

Former New York Governor Eliot Spitzer has emerged from his upstate seclusion and now has his nose back to the grindstone--this time in the private sector. There was no need to polish his resumé, however, as his new boss is his father. Bernard Spitzer, who is 83 years old and suffering from Alzheimer's, amassed a half-billion dollar real estate and money management empire during his career.

The abrupt job switch might be at least some comfort to the ex-Governor's wife, Silda Wall Spitzer, who Spitzer said once asked him "What was wrong with going into the family business? That wouldn’t have been so bad." Following Troopergate and Hookergate, it seems that Mrs. Spitzer may have been right from the get go. In addition to the new job, the Daily News reports that Eliot Spitzer is in therapy; presumably to understand his desire to have sex with beautiful young women.

Yeah, I know the obvious response to that last sentence, but paying tens of thousands of dollars for it might take some serious counseling sessions. Then you have to add in violating the Mann Act (famous prosecuting attorneys should know about these things) and moving money around in nefarious ways and then you can see he will have a very busy schedule from now on. I wonder if any of those therapists have offices in one of the five buildings facing Central Park that the Spitzers own?

Where Will All The New Yorkers Go?

No this isn't a story about I Am Legend, the eight million plus people here aren't going to disappear or turn into zombies. The problem here is more financial than Hollywood sci-fi. With all of the gentrification going on here in the city and out in the boroughs, New Yorkers are finding it harder to find decent places to live as the rents and real estate prices keep rising. We're not even talking about those in the lower income brackets, these are "middle class" families that are making $80 to $150K a year.

From Crain's New York:

Living in the city is becoming more unaffordable for the middle class, and not just in trendy Manhattan neighborhoods, where a two-bedroom apartment can cost about $1.5 million or rent for $3,500. Gentrification in parts of Brooklyn, Queens, Harlem and upper Manhattan is putting former middle- and working-class neighborhoods out of reach for many people.

Add a city and state tax burden that can approach 12% of income, and New Yorkers are being priced out of the city, which they don't want to leave.

"For middle- and working-class families, [the city] is unaffordable—increasingly unaffordable," says Vicki Been, director of NYU's Furman Center for Real Estate and Urban Policy.

Living in New York City has always been expensive, and that's the price people pay for its opportunities and vibrancy. But over the past decade, the cost of housing—the largest budget item for most middle- and working-class households—has been rising more steeply than ever. New developments are targeted primarily at the high end of the market, and the mayor's affordable housing program doesn't include a large segment of middle-income households. At the same time, rezoning has limited development in many middle-class neighborhoods.

So while the Mayor isn't doing much in the way of assistance, people are looking towards 2009 and the next Mayor who could possibly solve the real estate woes. Rent stabilization is being eroded by landlords desperately looking to cash in on the real estate boom. Those coveted apartments below market rate are disappearing at a rate that is higher than ever. So Comptroller William Thompson and Congressman Anthony Weiner are already using this issue as their central theme. What they'll do about it once in office, is yet to be seen though.

Brooklyn Waterfront Declared Endangered Historic Place

The National Trust for Historic Preservation declared that the industrial waterfront of Brooklyn to be one of the top 11 most endangered historic spots in the country. A local non-profit, the Municipal Art Society helped to nominate the area along with such sites as the El Camino Real de Tierra Adentro National Historic Trail that runs between Texas and New Mexico and the more famous Route 66.

This is an important development for the waterfront of Brooklyn because it shows how important this area is to the history of New York and the country itself. Instead of tearing down our history for the enrichment of developers, historians would rather see a transformation of the old industrial buildings such as what happened to SoHo and TriBeCa.

From The New York Times:

“They have value for the working waterfront and industrial retention in New York City,” Lisa Kersavage, a preservationist at the Municipal Art Society, said of the structures. “We need to raise awareness that these buildings are of national significance and that their loss is of national concern.”

The waterfront was nominated for the endangered list by the society, a nonprofit preservation organization. The society says that the city’s Department of Buildings issued 1,740 new building permits in Brooklyn in 2005. The same year the buildings department issued 1,924 permits for demolition, roughly double the number issued five years ago.

“Brooklyn lost five buildings and gained four new ones every day in 2005,” the society said in its nomination. Asked about the trust’s concerns, Daniel L. Doctoroff, deputy mayor for economic development and rebuilding, pointed out that some buildings might be preserved, like the Domino Sugar refinery, a brick Romanesque Revival structure that is up for consideration by the city’s Landmarks Preservation Commission.

Well of course the Domino Sugar Refinery won't be demolished, that would cause a city-wide uproar. This is more important than one famous example for the city to show a pseudo-soft side. The problem is that the city and the developers want to demolish Brooklyn bit by bit to raise real estate prices and gentrify as much of the city as they possibly can. Preserving the area isn't the most economically profitable solution for these people so Bloomberg and developers like the Atlantic Yards group fight against the community they want to sweep aside.

Expensive Real Estate Equals Big NYC Surplus

Yesterday Mayor Bloomberg announced that the city has a $3.9 billion dollar surplus for the year. Thanks to skyrocketing real estate prices that have defied the experts predictions as of yet, NYC is flush with cash. This number is double what the predictions were just two months ago. As the exorbitant prices help the city's piggy bank, how will the Mayor help our citizens who are being driven away by high prices?

From the NY Times:

Since 2005, tax revenues have been cascading in at surprisingly high levels, a phenomenon reflected in the quarterly financial plan updates the mayor is required to present. In addition to the projected surplus of $3.9 billion for the fiscal year ending June 30, the plan forecasts a $1.4 billion surplus next year; both sums will be rolled over into the following years.

In a City Hall news conference, the mayor attributed the exceptionally large surpluses to a boom in property transfer taxes, including mortgage recording taxes, which can generate millions of dollars when large properties change hands. All told, the city expects to collect $2.9 billion in such taxes this year, compared with $902 million in the fiscal year Mr. Bloomberg took office.

As properties are bought and sold, residents are on the move...out of the city to make way for those that can afford the ever-increasing cost of living in the five burroughs. Again, the question is what will the Mayor do for those that are less fortunate? Well we already know Bloomberg is cutting property taxes by $750 million and other taxes by $250 million. He also mentioned how to achieve happiness:

“The ways to be happy long term, however, is to not go out and spend everything you have on one night of food and a few drinks.”

Instead of a night on the town, why not focus on those that can't afford Smith & Wollensky or Tao and give more to homeless shelters and other tools to help the poor. According to the Coalition of the Homeless, family homelessness is rising rapidly at an eleven percent clip. Not only must we provide more shelters, increases for job training and family assistance would be nice as well.

Reading the NY Times article, you can see that plenty of people have grievances on how the Mayor should spend, or not spend the surplus. Conservatives want to rein in pension contracts with unions, business organizations want to make the property tax cut permanent and to pay down other debts.

To the Mayor's credit, he is introducing a plan to rebuild schools in the long-term to the tune of $28.4 billion in the 10 year capital plan. It is a start and there is so much more that is need to be done.