THEWALL STREET JOURNAL. * * Thursday, January 17, 2019 | S1

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2019A LOOK AHEAD

NewNewYork

The

Joe Woolhead

MidtownMeansBusiness.

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by Joseph Dobrian

Although the SBJSA seems to be gaining CityCouncil support, it appears unlikely to be ap-proved by Mayor Bill de Blasio. However, says LuiseBarrack, managing member of Rosenberg & Estis,calls for such legislation probably won’t go away,and the bill may reappear in a “less intrusive” format some point.

Most observers agree that street-level vacancy,especially of retail, presents a perennial problemin New York City: not because it indicates serious-ly high vacancy, but because it simply isn’t a goodlook. Empty storefronts are a high-profile remind-er that some small businesses struggle in the city.The cries of “something must be done!” have grownlouder. However, some real estate professionalssuggest that this particular “something” might bebased more on emotion than practicality.

The SBJSA would give any commercial tenantwhose lease is up for renewal the right to demandarbitration if they could not agree with the landlordon renewal terms. Even if tenants declined arbitra-tion, they would have the right of first refusal on thenew terms, if the owner reached an agreement witha third party.

“Most people in the real estate business agreethat this legislation would have a significant chill-ing effect on the market,” Barrack says. “The act haspopular support — but not in the business com-munity. If you’re trying to make sure we have fewerempty storefronts, more regulation won’t benefitthe cause. Naturally, people feel for the ‘little guy’who has been in a space forever when the ownerwants to do something different with the property.But if the city wants to preserve ‘mom and pop’businesses, this is not the way to do it. I’m prettyconfident that the SBJSA won’t go through; we hearthat Mayor de Blasio is not behind it. It strikes me asheavy-handed and counterproductive.”

“The Act would apply to all commercial tenantsand have drastic ramifications,” says James Nelson,principal and head of tri-state investment sales atAvison Young, a commercial real estate company.“It seems like it’s gaining a majority of City Councilsupport, although there’s strong opposition and it’snot clear what the Mayor would do with it. REBNYis leading the opposition, working with the CityCouncil to explore alternatives.”

“The SBJSA was a knee-jerk reaction to the

proliferation of vacant storefronts, but some re-tail corridors are already seeing a correction,” headds. “Some commercial rents have come downsubstantially; filling those spaces might cost a littlepain. But to mandate arbitration would set a dan-gerous precedent, especially when it would applyto a 500,000-square-foot office tenant. The realityis that some businesses are just not going to makeit. Churn creates better stores, better concepts. Themarket works itself out.”

Jeffrey Schwartz, partner with the SchwartzSladkus Reich Greenberg Atlas law firm, says re-sistance to the proposed legislation is particularlystrong from co-op and condo residential buildings,which often depend on revenue from street-level re-tail and would be hurt if they lost the ability to rentthat space at market value. “I hear the act is unlikelyto pass,” he says, “but if it does, there’s likely to be anexemption for co-ops and condos.”

“Retail is struggling as it is now, and the mar-ket will have to dictate its direction,” he adds.“Multiplatform giants are making it harder forsmaller retailers that offer goods for sale, ratherthan a service or an experience that cannot beprovided online. Owners will have to realize thatsmaller retail spaces that cannot accommodate thatkind of usemight have to be offered at more reason-able rent.”

“It’s likely that the bill will be rewritten to notcover large banks and similar tenants,” predictsSteve Soutendijk, executive managing director ofCushman & Wakefield and co-chair of REBNY’sretail committee. “Instead, it will cover tenants of2,000 square feet or smaller spaces. Guess who thatincludes? Quick-service cafe and restaurant chains.We see all types of unintended consequences.”

It’s called the Small Business Jobs Survival Act (SBJSA), but would this proposed

commercial rent control bill, currently being discussed by the City Council of New

York City, actually protect small businesses and jobs? Opinions vary, but the Real

Estate Board of NewYork (REBNY) andmost of its members say no. They consider the bill

an overreaction to an ongoingmarket correction and predict it would devastate commercial

leasing and development in the city.

Reality orJust Talk?

COMMERCIALRENT CONTROL

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2019A LOOKAHEAD

Douglas Durst

Jonathan Durst

FOUNDATION RE ADVISORSJeff Lerch

HUDSON REAL ESTATE PARTNERSAlexander Schwartz

JONES LANG LASALLEBob AgeloffChristian AllenKirill AzovtsevDavid DusekPaul FerraroPaul FormichelliErin GraceDeborah van der HeydenSimon LandmannMatt OgleBill PetersJason SchwartzenbergPatrick SmithDerek TrulsonJames WenkCorey Zolcinski

KASSIN SABBAGH REALTYAlbert ManoplaMarc Sitt

LEE & ASSOCIATESPeter BrausJP Sutro

NEWMARK KNIGHT FRANKDavid FalkNoel FlaggRyan GessinStephen GordonJason GreensteinScott GutnickMichael IppolitoDan KatcherRoss PerlmanPeter ShimkinHal SteinTravis Wilson

PRIME MANHATTAN REALTYJeff Hersh

RELO REDACShinya Sangu

RETAIL WORX BROKERAGEJonathan Krieger

ROBERT K. FUTTERMANMichel CohenNeal Ohm

SAVILLS STUDLEYNate BrzozowskiNicholas FarmakisZev HolzmanDan HorowitzJohn JohnsonJeffrey PeckRichard SchuhamStephan SteinerGreg Taubin

STISSING REALTYSteven Solomon

WHARTON PROPERTY ADVISORSRuth Colp-Haber

WINICK REALTY GROUPSteve BakerLouis EisengerKen HochhauserDanielle WinickJeff WinickStephen Gordon

Jason GreensteinScott GutnickMichael IppolitoDan Katcher Ross PerlmanPeter ShimkinHal SteinTravis Wilson

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THANK YOUWe are grateful to theNew York brokeragecommunity for yoursupport in helping uslease over 1,100,000 SFin 2018.

ADVISORS REAL ESTATEJames ClearyJeffrey Rosenblatt

CBREScott BogettiCara ChayetStuart EisenkraftRamsey FeherBenjamin FriedlandAnnette HealeyBrendan HerlihyDavid HollanderGary KamenetskyDavid KleinhandlerJoseph MangiacottiLewis MillerRobert MyersMichael PochZachary PriceJesse de la RamaKenn RappClyde ReetzScott SlovesAndrew SussmanMike WellenSacha Zarba

COLLIERS INTERNATIONALJedd HornMichael JosephMike StoneDavid Tricarico

CRESAJane RoundellBarry SpagnaBob Stella

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S4 | Thursday, January 17, 2019 * * THEWALL STREET JOURNAL.

Special Advertising SectionSpecial Advertising Feature

The arrival and expansion of several web-based giants in

New York City — most notably Amazon, Google and

Facebook — is likely to cause a positive revolution in the metro

area’s economy. This expansion will affect Queens andBrooklyn as

well as Manhattan and is likely to reduce the NewYork real estate

market’s dependence on financial services and related businesses.

Many observers expectAmazon’s development of Long Island City

to transform that part of Queens, turning its waterfront into a much more exciting part of the city and creating a dramatic ripple effect

on surrounding neighborhoods.

by Joseph Dobrian

Will Silverman, managing director ofthe brokerage firm Hodges Ward Elliott,says the tech influx will be a permanentand desirable game-changer for NewYork. Amazon might make the most vis-ible impact, at first, but the cumulativeeffect of these large companies and sev-eral smaller technology-based firms isincalculable.

“This demonstrates that once anycompany on earth reaches a certainsize, it requires a presence in New YorkCity,” he says. “It took Amazon doing itto make other companies realize whatwas under their noses: Long Island Cityis a perfectly logical place for the city’sexpansion.”

“Development on both sides of a riv-er, in any city, is organic, he adds. “ForNew York, it’s perfectly logical based onour transportation infrastructure. As anancillary benefit, it putsMidtownEast inamore important position.”

Silverman notes that Long Island City

is an easy commute from Brooklyn orManhattan, and arguably easier to getto than Manhattan from Fairfield andWestchester Counties. He adds thatthe nature of the business will boostemployment generally, well above the25,000 jobs that Amazon is expected tobring in.

“Tech-based companies have lots ofemployees who stay with them for onlya couple of years, then take other jobs inthe tech world and are replaced by new-comers,” he says. “The ancillary impactwill be extraordinary and long-term.The sitewhere they’re going to buildwaswherewe thought 5,000 residential unitswere going to go, so now developers aregoing to ask, ‘Do we have enough rentalsupply?’”

The impact on residential rentals islikely to be dramatic, Silverman says,because people in tech jobs are likely tobe high earners all their lives, but standless chance than people in financial ser-

vices of commanding truly stratosphericincomes. Thus, they will be permanenthigh-end renters.

“Retail in Long Island City will get alot better,” he continues, “and we’ll see aripple effect into Astoria and points fur-ther east. This will make New York Citya more balanced market, better able towithstand standard commercial real es-tate cycles.”

“Wealsoseestrengthening inWesternBrooklyn,” he adds. “In general, we’rebecoming a city that feels bigger be-cause our range of options is broaden-ing. We’ll start to feel more like Londonor Tokyo. We had been globally anoma-lous because we’re only now becominga waterfront city, which is how most ofthe world’s biggest cities started.”

Adam R. Sanders, partner in the lawfirm Rosenberg & Estis, says Amazonmight bifurcate its development intosmaller pieces, in different time frames,to take advantage of the favorable con-

ditions that the “opportunity zone”program allows, such as tax breaks forinvesting in low-incomeneighborhoods.

“If they branch out into other neigh-borhoods,” he says, by adding morebuildings and services, “Amazon couldhave a huge effect. We see severalways they and other companies mighttake advantage of the city’s opportu-nity zones.”

With this growth, says James Nelson,principal and head of tri-state invest-ment sales at Avison Young, a commer-cial real estate company, it becomesmore important to keep an eye on resi-dential rent regulation — and ensurethat it doesn’t hamper the developmentand improvement of quality housing.

“The next few years will be years towatch in the outer boroughs, with manynew businesses and new jobs being cre-ated there,” he says, “so we can’t losesight of the necessity of keeping NewYork City a good place to live and work.”

2019A LOOKAHEAD

Tech TitansCould TransformEast River Waterfront

JACK RESNICK & SONS

welcomes

to 280,000 RSF at

Ken Rapp, David Hollander, Doug Lehman and Brendan Herlihy of CBRE represented the tenant

David A. Falk, Daniel L. Levine, Peter T. Shimkin and Jason T. Greensteinof Newmark Knight Frank represented ownership

315 HUDSON STREET

GOOGLE

212.421.1300315hudson.nyc

NY

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Steve Soutendijk, executive managing director ofCushman & Wakefield, says that many regulations ofcommercial real estate are outdated or unduly oner-ous. He also suggests that advocates for more regula-tion often have unrealistic notions of how the marketworks — and of the crucial differences between com-mercial and residential real estate.

“For instance, it’s commonly misperceived thatvacant storefronts are a menace to quality of life,”Soutendijk explains. “People need to understand thatthere will always be vacancies in a market economy;there will always be turnover. Stores and restau-rants open and close as part of a natural life cycle.Commercial leases tend to be pretty long to justify theresources a tenant has to put into a space, and if youhave a vacancy, it will take an average of six to ninemonths to get a new tenant in place. It’s a lot differentfrom a residential lease, which typically lasts for oneyear and where the typical transition period betweentenants is 15 to 30 days. My economic well-being de-pends on tenants signing leases, but vacancies are apart of life.”

Soutendijk adds that these misperceptions lead toattempts to reduce vacancy through regulation. “Somepeople are calling for a vacancy tax to encourage own-ers to keep their properties fully leased,” he says. “Wealready have one: it’s called a property tax, and it has tobe paid nomatter what. If you ask for toomuch in rent,you’ll have vacancy. It takes time for themarkets to ad-just to changing conditions of supply and demand, es-pecially if it’s a non-elastic market like New York.”

Soutendijk also notes that regulations governing thesize and lighting of storefront signs are often “anachro-

nistic” and accuses some community boards of unduereluctance to grant liquor licenses.

As for congestion pricing, he says he supports a tollon motorists mainly because the revenue could go toimproving public transportation. “I’m for congestionpricing because traffic in the city is a huge issue, and itwill make the streets muchmoremanageable.”

Meanwhile, the city’s Advisory Commission onProperty Tax Reform is conducting hearings and gath-ering information with a view to introducing the firstsignificant property tax reforms in more than 20 years.Taxes on residential buildings favor the single-familyhomeowner; owners of rental apartment buildingspay a much higher rate — and inevitably pass the costalong to their tenants. Taxes on commercial buildingsseem especially impactful to owners of retail property,especially because of the sales slowdowns that someretailers currently face, which have led to downwardpressure on retail rents. Jeffrey Schwartz, partner withthe Schwartz Sladkus Reich Greenberg Atlas law firm,suggests that property assessors should look hard atowners’ Real Property Income and Expense (RPIE) re-ports, in view of current market conditions.

“The city has to recognize that retail is suffering,” hesays. “The city must be receptive to the idea that retailrents may have to come down, and property taxes willneed to be adjusted accordingly.”

Luise Barrack, managing member of the law firmof Rosenberg & Estis, suggests that instead of across-the-board rent controls on commercial space, the citymight consider giving tax breaks to owners who agreeto some regulation of that space, as is done with resi-dential units.

“New rent-stabilized apartments are all comingfrom the 421a tax abatement,” she points out. “Maybesomething similar could be done for commercialspace. It’s a way for the government to tip its hat to theowner, recognizing that the property does belong tothe owner.”

Special Advertising Feature

Newzoning laws, congestion pricing and commercial rent control are only a few of the

regulatory changes currently being discussed or implemented in NewYork City —

and real estate professionals and the business community are finding plenty to be pleased

and dismayed about.

REGULATIONHELPS/HINDERSNYCREALESTATEby Joseph Dobrian

2019A LOOKAHEAD

REBNYHonors7 Leaders at

Annual Banquet

Silverstein Properties

TheReal Estate Board of NewYork (REBNY) will honor seven

of its members at the organization’s 123rd Annual Banquet, to

be held tonight at the NewYorkHilton in MidtownManhattan.

“The REBNY Banquet is more than a celebration of real estate’s best

and brightest,”says REBNY ChairmanWilliam C.Rudin.“The honorees

reflect the kind of excellence and dedication that we all strive for.They

have made exceptional contributions to the industry and our city.”

John H.Banks,REBNY President, adds,“This banquet will be a great

celebration of excellence, dedication and public service represented by

each of our distinguished honorees.”

Daniel R. TishmanPrincipal owner and vice chairman of TishmanHotel andRealty,will receive the Harry B. Helmsley DistinguishedNew Yorker Award, presented to an industry member forinvaluable contributions to New York’s civic welfare andthe real estate community.

Diane M. RamirezChairman andCEOofHalsteadReal Estate,will receivethe Bernard H.Mendik Lifetime Leadership in Real EstateAward for her exceptional professional accomplishments,leadership and service to the real estate industry.

Carol KellermannPresident of the Citizens Budget Commission,willreceive the John E. Zuccotti Public Service Award, givenfor exceptional accomplishments and service in the pub-lic interest.

Helena Rose DurstPrincipal atTheDurst Organization,will receive theKenneth R. Gerrety Humanitarian Award, whichrecognizes a REBNYmember’s meritorious serviceto the community.

BernardWarrenChairman and president ofWebb&Brooker,will receivethe GeorgeM. BrookerManagement Executive of theYear Award, for superior accomplishment in propertymanagement.

Ira Z. FishmanPartner atHSPReal Estate Group, will receive the LouisSmadbeckMemorial Broker Recognition Award, whichcelebrates a commercial broker with exceptional per-sonal and professional integrity, leadership, prominencein the brokerage community and service to REBNY’scommittees.

Alex BernsteinExecutive vice president and newbusiness director atBernstein Real Estate,will receive the Young Real EstateProfessional of the Year Award, presented by the YoungMen’s/Women’s Real Estate Association of New York to amember who exemplifies integrity, professionalism andpersonal ethics.

by Joseph Dobrian

List Your Property Today

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Special Advertising SectionSpecial Advertising Feature

2019A LOOKAHEAD

What are the main issues REBNYwill be working on with city andstate governments in 2019?

Residential rent stabilization laws arecoming up for renewal in June 2019, andwe want to ensure a balanced approachto addressing the city’s affordability cri-sis. It is important that owners continueto have the ability to reinvest in, andupgrade, their properties and improvethe overall quality of housing, while atthe same time making sure that ownerswho abuse the existing regulatory frame-work are dealt with strictly and swiftly.If tenants are being harassed, the ownershould absolutely be held accountable.But enforcement regulations should berational for the overwhelming major-ity of honest owners who maintain theirbuildings and provide good services. Weneed to protect tenants in place while of-fering new affordable housing — but thekey for creating affordable housing is theability to construct new units, not limit-ing supply.

We also need to make New Yorkersaware of real estate’s economic impacton the city in terms of the taxes thatpay the salaries and benefits of teach-

ers, police and firefighters. Almost halfof the City’s tax revenue comes from thereal estate industry, and limitations onfuture growth will have a considerableimpact on the city budget. We have tocreate quality housing — because, withNYCHA, we have seen firsthand whathappens when there is no investmentin housing.

Andwehave to deal with constructioncosts and onerous regulations such asthe Scaffold Law, which imposes “abso-lute liability” for elevation-related inju-ries on contractors and property ownersengaged in construction, repair or de-molition work. New York is the only statein the country with a law of this type, andit increases construction costs by morethan 10 percent because of that shift of li-ability. It applies to residential and com-mercial construction, and even to publicworks, such as infrastructure.

Finally, we are working on diversity inour industry. Early in 2018, we created aworking group to address the questionof how we can create more opportuni-ties for women and people of color inall segments of our industry. That groupis formulating a plan that we will use asa road map, and we will begin announc-

ingnew initiatives, sometimespartneringwith existing organizations, to encouragetrainingandparticipation in the industry.

Does REBNY continue to advocatecongestion pricing for motorists inManhattan below 60th Street?

Yes, and so do other individuals andorganizations. Governor Cuomo’s work-ing group on this subject issued a reportarguing for congestion pricing and in-vesting the revenue in our transporta-tion to create a world-class public transitsystem. We have worked with severalgroups — the Environmental DefenseFund, Rider’s Alliance, 32BJ SEIU, thePartnership for New York City, Uberand others — to support congestionpricing throughout this year, and theeffort will continue into next year’s legis-lative session.

What are the most interesting devel-opments REBNY has touched thatwe’ll see in 2019?

The Midtown East rezoning waspassed a year ago, which was the cata-

lyst for J.P.MorganChase to build a new1,400-foot-high headquarters at 270Park Avenue, along with theMTA’s EastSide Access, which will open in 2021or 2022. Midtown has also seen notice-able improvements at buildings like399 Park Avenue and 601 LexingtonAvenue by Boston Properties and425 Park and 390 Madison by L&LHolding Company.

TheAmazonannouncement is incred-ibly exciting for Long Island City, alongwith the residential and commercial de-velopment already underway. At Rudin,we are excited about Dock 72 at theBrooklynNavy Yard— the first fully ame-nitized office building built in Brooklyninmore than a decade.The growth of theouter boroughs is an important trend; ingeneral, we are extremely pleased to seeall the venture capital that is flowing intothe city.

We’re seeing a slight uptick in com-mercial leasing, and I’m optimistic thatretail will pick up speed, withmore casu-al dining andmore experiential retailing.Owners like Brookfield are structuringleases that are percentage-based, notjust a fixed rent—which is an innovativeconcept for retail leasing.

William C.Rudin, chairman of the Real Estate Board of NewYork (REBNY), sat down with real estate writerJoseph Dobrian on the eve of REBNY’s 123rdAnnual Banquet to discuss his group’s plan for NewYork City

in the new year.

John BanksTalks About REBNY Initiatives

Going into 2019, the Real EstateBoard of New York (REBNY) is going tostay active in meeting local challengesand working to keep commercial andresidential real estate prospering in NewYork City, according to John H. Banks,president of REBNY. Growing the indus-try by making it more inclusive is at thetop of REBNY’s priorities; so are fightingregulation of commercial rents, advo-cacy of congestion pricing in Midtown,and supporting its members’ invest-ments and initiatives.

“When our chairman, Bill Rudin, tookoffice a year ago, one of the main thingshe and I discussed was the need for theorganization to take a leadership role indiversity, inclusion and equity in the in-dustry,” Banks recalls. “We established,REBNY’s first diversity working groupand I became chairman of a construc-tion training nonprofit organizationcalled Building Skills New York, for first-time entry-level job seekers. In 2018,we placed 240 of those trainees in jobs.We’re looking at best practices in otherindustries for increasing diversity andlooking for possible partnerships withbusinesses that could provide pathwaysto careers for peoplewhomight not haveotherwise had those opportunities. Welook forward to rolling out other pro-grams in the coming year.”

HOPES TO INCREASE RESIDENTIAL SUPPLYAnother major concern on REBNY’s

radar is that current residential rentregulations expire in June, and thecity is likely to readjust the amountsby which stabilized rents may be in-creased. The city might also addressthe question of whether the status ofcertain regulated or unregulated resi-dential units should change.

“Whatever changes are enacted, wemust address the problem of afford-ability, which some proposed changesdon’t address,” Banks says. “We wantto enable owners to invest more in the

quality of housing stock; we want to in-troduce more product into the supplychain. Bear in mind that in the next 25to 30 years, our population is likely to in-crease by onemillion people, andwherewill we put them if we don’t develop thecity? Smart density can be achieved,but the knee-jerk reaction that we can’tbuild more tall buildings goes againstthe historical tradition of our skyline.”

Banks says REBNY is also concernedabout improving infrastructure, par-ticularly public transportation. He seescongestion pricing — in effect, a taxon driving in Manhattan below 60thstreet—asanefficaciousway to fund theMetropolitan Transit Authority (MTA).

“We advocate responsible conges-tion pricing, because the MTA is criticalto commerce,” he explains. “We haven’tyet articulated what the components ofsuch a scheme should be, but we wantto discuss value capture.We can’t let thisbecome a boondoggle for theMTA.”

GOING FORWARDWhat’s next for development in New

YorkCity? Banks urges observers to lookto the Bronx, where he says the rezoningof Jerome Avenue will serve as a catalystfor growth in the borough. He expectsthe entire city to become a technol-ogy hub to rival the San Francisco andSeattle metro areas. Health care andeducation will grow in importance, headds, taking some of the performanceburden off the city’s traditional “BigThree” industries: financial services,insurance and real estate. However, heremains concerned about what he per-ceives as an undercurrent of anti-devel-opment sentiment.

“It’s difficult for developers whenpeople ignore as-of-right zoning andtry to stop development,” he says.“Development is necessary. It providesjobs in construction and much-need-ed housing, and encourages people tospendmoney in their neighborhoods.”

by Joseph Dobrian

Q&AWITHREBNY CHAIRMAN

by Joseph Dobrian

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Recently approved relaxation of zoning regulations inManhattan’s Garment District is likely to lead to redevelop-

ment and more lucrative leasing deals in the area between Midtownand Midtown South. The Garment District, generally defined asWest 35th to 41st Streets between Fifth and Ninth Avenues, hastraditionally been the heart of the city’s fashion industry.However, many observers have felt for decades that theneighborhood could contribute more to the city’s economicgrowth if it were rezoned, and the requirements to maintain acertain amount of space devoted to that industry were easedor removed.

by Joseph Dobrian

Todd Korren, principal at AvisonYoung, a global commercial real es-tate firm, explains that the rezoningwill protect spaces currently used bygarment manufacturers, but will makethe neighborhood more accessible toother industries by removing the re-quirement that property owners add asquare foot of garment space for everysquare foot lost to that industry due tonormal tenant turnover. He notes thatlandlords and the city have “done anincredible job” in maintaining manu-facturing space citywide, but “if youdon’t change, you die.”

MAKING IT WORK

“Industry City, formerly BushTerminal, in Sunset Park, Brooklyn,has had about $135 million pumpedinto it by the New York City EconomicDevelopment Corp. to create about200,000 square feet of garment manu-facturing space,” Korren notes. “It’s anamazing campus of light manufactur-ing and affordable office space, wherethe tenants are all benefiting from theirproximity to each other. Meanwhile, in

Manhattan’s Garment District, manu-facturing jobs are being lost due to con-solidation and attrition in the industry,and this trend won’t change regard-less of zoning or legislative initiatives.By adjusting zoning restrictions to re-flect permanent changes to space use,while still preserving space for manu-facturing, you’ll see property pricesrise—which is good for the city — andlandlords won’t be afraid to invest intheir buildings.”

Korren foresees the same effect inthe Garment District as has been seenin DowntownManhattan in the past 20years. Downtown, he notes, used to bestrictly a five-day-a-week, 9-to-5 area;today, it’s full of diverse office space us-ers, apartment buildings, hotels, retail,entertainment venues and other cul-tural attractions.

“More retail will move into theGarment District because there’ll bemore office space,” he says. “Today, thedistrict is one of themost underretailedparts of the city. It wouldn’t be goodto remove all protections of its tradi-tional industry, but by relaxing them,

we’ll add excitement and vitality tothe area. The city is to be commendedfor getting all parties involved in thedecision: owners, employers, employ-ees, residents, community groups andgovernment.”

OFFICE WORKERS STILL LOVE MIDTOWN

Meanwhile, commercial leasing inMidtown is likely to stay brisk through2019, according to Tom Bow, executivevice president of commercial leasingfor The Durst Organization. He sayshe’s especially enthusiastic about twoMidtown properties: 151 West 42ndStreet (formerly4TimesSquare),whereDurst recently spent $150million to re-position a 20-year-old asset; and 1155Avenue of the Americas (between 44thand 45th Streets), whereDurst invested$120millionon improvements. Leasingactivity is healthy in both buildings,he remarks.

“The 42nd Street property, whichwe call One Five One, used to have apublishing house in one half of thebuilding and a law firm in the otherhalf,” he explains. “Both are relocat-

ing, and we had 92 percent of the for-mer’s space leased by the end of 2018.The latter might be as much as 40percent pre-leased in the first quarterof 2019, despite the fact that the lawfirm’s lease does not expire until May2020. Tenants are attracted to 1155 be-cause of its relatively small footprint,where they can lease two or threefloors and have a significant pres-ence in an 800,000-square-foot build-ing instead of getting lost in a muchbigger building.”

Bow adds that the entry of Amazonin Long Island City will have a big im-pact on Midtown Manhattan as well.“The presence of tech companies willcontinue to grow,” he says. Googlewill have a campus on Hudson Squareequal to what they have on the WestCoast. Facebook is moving in that di-rection too. “Downtown’s tenant basehas become much more diverse, andMidtown is following suit, becomingless dependent on one industry.”

Joseph Dobrian is a freelance writerspecializing in real estate matters.

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