Hurricane Sandy may have had an immediate effect on New York City’s commercial real estate, but President Barack Obama’s second term and local and state tax policy will have much longer lasting impacts on the industry, real estate veterans said today at the NYU Schack Institute of Real Estate’s Capital Markets Conference.
After Sandy, office stock in the city did not fare that badly, said SL Green CEO Marc Holliday, noting that of the 28 million square feet of space the real estate investment trust controls, only one building was damaged badly enough to warrant significant repairs.
However, New York City’s recovery is dependent on action from both the city government and from Albany, real estate leaders said. Tax breaks and legislation will be key to helping New York maintain its greatest asset: its position as a global financial center, they said.
Holliday was joined on the panel of experts by CBRE’s Darcy Stacom, Silverstein Properties’ Larry Silverstein, Related’s Stephen Ross, Rudin Management’s William Rudin and Area Property Partners’ William Mack, at the 45th annual NYU conference, held at the Waldorf Astoria Hotel.
Stacom, vice chairman at CBRE, said the city should consider tax breaks for relocation expenses, in order to ease the burden on small businesses, and also to indicate to investors that the city is taking steps to ensure commercial buildings near the waterfront remain viable assets. “The city needs to protect itself,” she said, or investors will flee.
Rudin underscored the need for New York to invest in infrastructure, suggesting that the 421-G tax abatement — which provided incentives for commercial buildings to be converted to residential downtown — be revitalized. “It takes political will,” to complete big projects, such as recovering from the hurricane, he said.
But Obama’s re-election means far more for commercial real estate in the long-term, Mack emphasized. He anticipated that the Obama administration would keep interest rates low but “taxes high,” which he said would be good for investment, but not for growth. Additionally, he expected that the enforcement of Dodd-Frank, the legislative package of Wall Street reforms, would go forward, impacting financial services tenants that make up the lifeblood of commercial leasing.
Holliday also expressed concern over Dodd-Frank’s broad strokes, particularly when it comes to limiting investment banks’ bolder behavior. “We aren’t talking about repeal, but investors need to be able to take some risks,” he said. “They aren’t supposed to only invest in the best companies — small and medium sized companies need capital too.”
Mack agreed that tightened credit standards could suppress growth in the industry, especially residential sales, in the long-term. While demand for housing remains high currently, because construction stalled in the recession, the demand for new residences nationwide in seven to ten years is not certain, he said.