Skip to main content

Featured Post

Atlantic Yards/Pacific Park graphic: what's built/what's coming + FAQ (pinned post)

As the "Power Brokers" panic, questions about the future of real estate and the city's precariousness (and p.r. fluff)

The Panic Attack of the Power Brokers, wrote New York Magazine's Andrew Rice 10/13/20, quoting real estate machers as deeply unsettled by both the coronavirus crisis, notably its effect on building and sustaining use of office space, and the city's political rejection of development projects.Writes Rice:
If the entire real-estate industry is filled with anxiety, there’s still a hierarchy of distress. The multigenerational family companies, like Spitzer’s, tend to be less heavily leveraged, which should allow them to ride out the pandemic. (Or so they say — they’re extremely private companies, so who knows?) The public real-estate companies are more exposed to market forces.... More imperiled still are the adventurous investors — the ones who are building condo towers catering to foreign billionaires or who borrowed heavily to buy high on speculative trends. 
What about AY?

What does that mean for Atlantic Yards/Pacific Park? Well, there are family companies, like TF Cornerstone and The Brodsky Organization, already willing to invest and take--presumably--relative bargains at the time. 

The master developer, Greenland USA, was supposed to have deep pockets thanks to its Shanghai-based parent, Greenland Group, but that parent's credit rating has dipped to junk, and the company's ambition to expand in New York/Brooklyn has likely abated. So it's a bit of a mystery.

That raises questions about plans to invest in a platform for new construction over the Vanderbilt Yard--supposed to start this year--and to build six towers over that railyard. The units would likely be rentals, with an affordable component, not luxury condos, but high-rise construction--at least in the short run--faces question marks.

What about office space?

The article quotes New York technology entrepreneur Kevin Ryan as saying, "There is zero question that the demand for commercial real estate is going to go down, and prices are going to go down dramatically."

Bottom line: the market for a ground-up office building, such as the long-pending plan for Site 5, long home to P.C. Richard and Modell's catercorner to the Barclays Center, is even more doubtful.

A 10/13/20 New York Times article, On the Hunt for Office Space, Companies Stay Low to the Ground, also bodes ill for skyscrapers and suggests a new enthusiasm for broad, wide "groundscrapers," which, of course, require a large footprint. So, other than adaptive reuse of existing buildings, New York City doesn't offer much of a supply.

A looming crisis

Rice points out that the bottom could be ugly, pointing to the "urban catastrophe of the 1970s" during which the city lost about a million people, with landlord-fueled arson, and increasing debt making the city fragile.

He writes:
Back then, the real-estate families organized to save the city’s government — and their own financial interests — by prepaying a huge chunk of property taxes, helping to stave off municipal bankruptcy. The governor appointed an investment banker named Felix Rohatyn to work out the city’s bond debt — it’s still being paid off — and created the Financial Control Board, which wrested authority over the budget from the mayor. Ineffective elected officials were supplanted by an elite group of corporate and civic leaders, a cadre the Village Voice journalist Jack Newfield referred to as the “Permanent Government.”
...The key to the city’s resiliency, the members of the Permanent Government argue, is its devotion above all to economic growth and real-estate development. It is growth that produces new tax revenue, allowing the city to provide services to its citizens, making it an attractive place to live and work, creating new growth and development.

Now, says former Deputy Mayor Dan Doctoroff, that's imperiled, with a vicious cycle, including increased crime, fueling more departures and debt.

“Nobody’s rallying around right now,” Doctoroff lamented. He has been trying to organize a new political group he is calling the Coalition for Inclusive Growth, aiming to raise $10 million to shape the debate over the issue ahead of next year’s citywide election.

As Rice points out, the use of "inclusive" is a nod to the Bloomberg administration's failure to plan for such growth, which is fueled enormous skepticism--perhaps, the author suggests, too much.

What about Industry City?

The article suggests that the failed rezoning of Industry City represents a head-in-the-sand approach from development critics:
Another is the redistribution of commercial activity to the residential boroughs. Over the summer, the Permanent Government was buzzing about a long-debated plan to expand Industry City, the massive warehouse conversion project along the South Brooklyn waterfront. The private developers behind the project were proposing to build over a million square feet of new office and retail space, which, they projected, would create 20,000 jobs and provide the city with $100 million in yearly tax revenue. The project, which needed no government funding, seemed perfectly tailored to a future in which offices were dispersed around the city, rather than concentrated in a few dense blocks.

The privately financed development required a rezoning, and an ambitious pair of young City Council members were pushing for its approval. “That is the most hopeful thing I have seen,” said Jonathan Rosen, a veteran Democratic campaign strategist and public-relations executive. “The idea that there’s this next generation of leaders.”
(Emphasis added)

Oh, come now. Rosen works for real-estate developers (though not Industry City), so he's hardly a neutral expert.

And, as I pointed out in a comment and a tweet, that claim of 20,000 jobs was bogus.

“The new generation of progressive electeds don’t have a sense of how dire this is,” Rosen told Rice, and that deserves debate. But if journalists and the Permanent Government are going to regurgitate real-estate propaganda, well, we can't assess their proposed solutions without debate, either.

Comments