Thursday, April 05, 2018

Saving small businesses in New York: what are the solutions? - Curbed NY

This thoughtful article doesn't have all the answers to the mall-ification of NYC, but I think it has some good ideas and does a really great job pointing out the issues, and discussing some ideas that have been proposed to help small retail businesses thrive.

As manager of a couple properties with small retail businesses in their store fronts, I am pretty familiar with the struggles.  The idea that banks won't finance new construction unless "credit tenants" (aka national retailers such as banks or drug stores or big brands) anchor the retail was news but not a surprise to me.  Now we see why every time a new condo goes up, Starbucks goes in on the ground floor (not that I'm complaining, mind you!).

As for some of the solutions, well, I feel they cause additional issues. Mandatory 10 year leases aren't likely to work - because people who start small businesses have high failure rates and won't make it to 10 years in business. So then banks considering mortgages will discount the values of those 10 year mortgages.

Mandating one three-year extension at the outset of the initial lease might fly. But how does that do anything but pass the buck down the road, when retail rents have gone further up and the small business must somehow make an even bigger jump?

Mayor De Blasio made some noise last week about charging landlords who "keep their storefronts empty" waiting for tenants who will pay high rents. How does he decide on who is doing that?  Is there a mandatory time frame? A specific asking rent that would trigger the charge? A combination of the two?  Do they spend money every year indexing average asking rents in various neighborhoods?  Obviously asking a Soho rent in the Bronx is unrealistic, but what's an outrageous Soho rent?

The idea of giving FAR bonuses to landlords who are going to include retail has legs. There are a lot of neighborhoods - mine included - where retail storefronts are in need.  Whether it's a small or large business in that store front, we could use more stores!  So why not allow any building on a large (perhaps defined as 4-lane, two way streets?)  automatically have a commercial zoning for the ground floor, and allow the developer a bonus sq footage?  It's likely to benefit the neighborhood better than the "plaza" bonuses, many of which plazas remain shuttered to the public even after heavy coverage from a few years ago.

Another option mentioned was the implementation of restrictions of proximity for ubiquitous businesses such as banks in certain areas.  I grew up in a small town in Northern Virginia that had such an ordinance - against fast food restaurants.  They couldn't be less than 500 feet from each other.  So when Taco Bell wanted open up about 400 feet from the existing McDonalds - well, that was a fight (that resulted in a variance allowing Taco Bell to open, although the McDonalds eventually relocated further away and a carpet store took over its old space.). But overall I think it did do something for our little town. So, as then-Councilwoman Brewer said, "it's one tool in the toolbox."

I would like to see a bit more self-policing from landlords - especially long time landlords who have substantial equity in their properties and aren't faced with a refinance every few years.  Have 3 storefronts? Try to get or preserve a small business in one of them.  Lobby for tax breaks for long term tenancies of small (fewer than 3 locations) businesses.  I'll point out that since landlords with commercial spaces must submit Real Property Income & Expense statements annually to the city - disclosing rent rolls and income - their property taxes are already determined based on existing income, so lower rents *should* result in lower property taxes.  In other words, if your property isn't beholden to a mortgage bank, then you can afford a slightly lower retail rent.

Ultimately, it's going to take agreement among many stakeholders to achieve a new equilibrium that saves NYC from going suburban.

Saving small businesses in New York: what are the solutions? - Curbed NY:

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Friday, March 09, 2018

Landmarks Commission begins overhaul of application process | Crain's New York Business

I have to say this would be a very welcome development.  I recently had to help a business through a number of landmarks processes and all I can say is it took a LOT of time.  Thankfully this building did not require going through a public hearing, but I have to wonder how does it help the city?  It certainly doesn't keep the costs of maintaining the property down, and as a result Landmark Districts are among the most expensive to live in in the city.

I suspect this "overhaul" is going to consist of very low hanging fruit (such as the window review process mentioned in this article). But anything is better than nothing...

Landmarks Commission begins overhaul of application process | Crain's New York Business:

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Friday, January 12, 2018

Second Avenue subway pays dividends for Yorkville landlords, defying Manhattan rent declines | Crain's New York Business

Hard not to say "I told you so" about this.  Unfortunately by the time it gets to the press, the rents are already rising. However I still think that sales in the area are per square foot a bargain over other parts of Manhattan!

Second Avenue subway pays dividends for Yorkville landlords, defying Manhattan rent declines | Crain's New York Business:

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Thursday, August 31, 2017

Rents Flat since 2016, Residential Sales Up but Lower Price Point, Office Rents Up

Some real estate agents have acknowledged there has been a slow down in rents in the city - a blurb by the New York City Economic Development  Corp (NYCEDC) quoted local companies showing rents staying practically flat against June 2016.

Landlords should adjust their expectations.  Don't look at the highest rents advertised and price your unit there just because... there are fewer people looking around and they start at the bottom of the scale, not the top.  

In addition, don't over renovate (ie, choose all the most expensive materials), but do fit in amenities that are important for living (so, marble - out; dishwasher - in). 

When I started in the business in 2005, it was more common for Manhattan units not to have any dishwashers.  They were the domain of doorman "luxury" buildings.  But frankly, more and more new arrivals in New York expect dishwashers - or set their sights on one.  More than one renter has said "I can't live without" or, more telling: "I know I can't have everything I want, but dishwasher is one thing I am willing to pay for."

As I deal in the older parts of the city, I have this conversation with sometimes generational owners who don't see the value in adding dishwashers, and importantly, might not have the infrastructure needed (mainly, a waste pipe that's wide enough to handle it).  We have to have the tough conversation as to whether it makes sense to open a wall on every floor to replace that often corroded infrastructure with something new.  It will last for decades, but that doesn't mean it's not a messy, expensive job.

As we head into what I think will be an extended flat patch for rents, and as NYC's buildings continue to age, more and more landlords will have to do this calculus with their budget.

If you want to talk about this or any other maintenance issue, please feel free to contact me.

Sunday, June 11, 2017

Inventory Shrinks as Home Shopping Season Kicks Off | StreetEasy

Not surprisingly, first time homeowners are getting in on the action this year, but there aren't as many homes for them to buy.

If you're in the market to buy a home, keep in mind that listings will be competitive and prices will be up.

But if you're a seller, just remember that it is still possible to over price and end up with a listing that sits on the market!

Happy Hunting!

Inventory Shrinks as Home Shopping Season Kicks Off | StreetEasy: " summer up to be a competitive shopping season for buyers."

Tuesday, May 30, 2017

Retail Report - but What Really Stuck With Me

Large commercial brokerage Marcus & Millichap kindly posted this video link to a CNBC interview that their CEO gave last Thursday. They were discussing how malls are faring given the "Amazon-ization" of so many businesses.

While Mr. Nadji had some good insights into how malls are being repurposed (one thing that stuck out to me was that fitness and wellness companies - which do require physical locations - were moving in where the former product-based retail moved out), the one thing that stuck out to me most was that apparently, fast food sales were higher than grocery sales last year for the first time!

I'm not surprised that fewer people have time to cook - that's one reason we have single and double portions of chopped vegetables available at Whole Foods now, pre-chopped meal services like Blue Apron, etc.  But fast food?  I'm a little surprised because I always thought the millennial generation cared more about their health.

Then I remember: Chipotle and salad companies like Just Salad, Chop't (a favorite of mine), and Sweetgreen also technically count as fast food. So does Starbucks, whose bottom line I contribute to mightily despite the fact that I don't drink coffee.

Maybe I'm getting a bit old, but I've always struggled with my weight, so I have tried to embrace the slow food, home cooked movement.  Plus, I'm such a picky eater that I like making my own food just the way I like it.  So it feels like cheating to me.

In the meantime, an interesting juxtaposition of fast food and gyms, spinning gyms, mixed martial arts gyms, and maybe a few day spas, physical therapy offices and urgent cares will define your mall experiences for the near future.  And Starbucks, of course.

Marcus & Millichap - CNBC:

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Tuesday, May 23, 2017

Announcing Solid State Properties LLC!

Effective immediately, I'm proud to announce that I have started my own company, Solid State Properties LLC, to continue the focus on small property management in Mid and Lower Manhattan, and parts of Brooklyn as well.

Solid State Properties LLC is a New York City based property management and brokerage firm specializing in Manhattan and Brooklyn properties under 6 stories. Whether it's a single condominium unit, a mixed use property, small co-op or small office building, we practice efficiency of scale and no-nonsense management, and rental brokerage all in one.

Thursday, July 16, 2015

2016 Tax Rates by Class

‎In case anyone missed it:

The City Council adopted real property tax rates for fiscal year 2016, which begins July 1, 2015.  Here are the 2016 tax rates by class as well as last year's rates for comparison.  
Tax Rates by Class

Please note that the tax bills issued for the first half of fiscal year 2016 (July 2015 through December 2015) were based on the fiscal year 2015 tax rates.
As a result, your second half tax bill will be based on the recently adopted fiscal year 2016 tax
 rates and will include an adjustment for any overpayment or underpayment in 
the first half of the year.


Monday, July 13, 2015

My Own Non-Scientific Take on the City-Verizon Spat

I've been following Crain's NY Business' chronicle of the fight that the De Blasio administration is picking with Verizon over its failure to roll out FIOS citywide. In a nutshell, Verizon struck an agreement with the Bloomberg administration in 2008 to install fiber optic cable (trademark FiOS) internet access throughout the city, ostensibly so that areas served by only one cable provider (Time Warner, Cablevision, etc.) will have another choice.  This makes sense on the face of it. After all, cable companies are currently the only broadband providers in certain areas. Sure, you can go with another "provider" if you want - you might get mailings announcing "alternatives", but the fact is that in most areas, those companies have to rent capacity from the main cable company in the area, for the simple reason that those are the only cables in the ground.

My bugaboo with the whole scheme is that while attempting to lay all this fiber, Verizon has completely neglected the existing copper wire network that runs throughout New York. It is falling apart - and that fact is not being covered all that extensively.  One article in Ars Technica from 2014 mentions it briefly, as does the above Crain's article, again, briefly.

Let me paint a picture at how bad it has gotten by talking about two buildings that my firm manages. The first is on West 11th in Greenwich Village, a building with residential and business tenants.  At least every two months, and sometimes more often (depends on the weather conditions), I am forced to meet a Verizon repair tech at this building to let them through an apartment to the back, where they try to find a "good pair" in the phone box. This box is older than the hills, and it's full of rust. But when I have asked about replacing said box, I'm told that Verizon isn't replacing ANY copper phone equipment.

The problem is sometimes within the line between the building and the hub, which is an apartment building on the next block south. The tech must then go back and forth between this building and that, trying to find a connection that will hold. Once, I was told it was not the box, but the line between the hub and the box, which - in contradiction to Verizon's claims in the articles - runs above ground. You can see the phone wire strung all along the back yards of the block! When the line "goes bad" - meaning that it gets exposed and nicked/broken somehow - the tech has to "splice" it, meaning cutting the damaged part of the line out and basically taping the two ends together.  The tech who told me about the line said "that line has so many splices in it I don't know how it still works."  When I asked about getting a new copper line run - yes, you guessed it!  "They're not replacing anything."

 So, the tenants in this building constantly lose the phone service they pay so much for. And it's not just that building! My firm manages an adjacent building that has also had similar phone problems.

I looked into FiOS as an option to get away from the crumbling infrastructure and found to my amazement (though not so much now that I've been reading articles telling of similar experiences all around the city) that FiOS is NOT available on that block. This blew my mind. I understand that Verizon may not wish to wire every small building right off the bat (though seven years in one would hope they'd made some headway), but this building is right between two major thoroughfares - Fifth and Sixth Avenues - that surely must have fiber available? They don't have to bring it that far, and they have a building manager - ME - who is willing to get them access - all so they don't have to waste thousands of dollars visiting this building's back yard every six to eight weeks. Recently I head that another building towards Fifth Ave had successfully managed to get FiOS installed. How did they do that?

Which leads me to the other building, also on Fifth Avenue in the Flatiron. This building is not a large office building but it happens to have line running through it that serves some adjacent buildings as well. Within the past two months I have had at least five technicians needing access to that basement to repair copper phone and data connections! Again, I am completely shocked. The copper here in Silicon Alley is no better maintained (though it is apparently underground)! And I listen to the techs speaking with their home office, trying again to find "good lines". There isn't enough capacity to service all the commercial and residential tenants in that block!  The tech suggested I try to get some of them to sign up for "fiber", which would alleviate the crowded copper box.

Today I had a conversation with a very nice lady from the Verizon business office, and she informed me that she knew "no more FiOS installations were being scheduled for the rest of the year".  !!!!!!  In the meantime Verizon is spending millions of dollars running fiber "past" buildings but telling potential customers that it's not available to them. What kind of shell game is that? It reminds me of the recent scandal about the military contractors who built all kinds of equipment that only got destroyed once it was shipped to the Middle East. And all the money spent on advertising a service that no one can get? There's just no answer to that.

Following which, I might as well air my frustration at the fact that I am seeing many many of those little internet antennae popping up all over the place in Manhattan subway stations... but I am not getting any service!  I travel all over the city (forget the fact that not a single underground station in Brookyn has service), and I have seen these tell-tale signs of service in Washington Heights, East Harlem, and the Lower East Side - some for eight months or longer - but zero bars in any of these stations (I'm looking at YOU Second Avenue!).

I've said before that Transit Wireless' strategy seems completely haphazard. Their blog states that they have begun installing equipment in Upper Manhattan and the Bronx, but their Lower East Side stations? Nary a word - oh wait, I see that Delancy is part of the Phase 3 rollout - but no announcement as to when that will happen?

Oh, and the website seems to have been hijacked, or given up. It takes you to a website about call forwarding. It does not, as suggested on the Transit Wireless website, show you which stations have service.

Friday, June 20, 2014

How Much Higher Can Rents Go if Manhattan Wages Keep Falling?

According to the US Labor Department, employment in Manhattan increased, but wages have fallen because fewer jobs were added back in the finance industry. Overall private sector wages fell 3.3% in Manhattan.  

What does this mean for the crazy rents that we see throughout Manhattan? And the crazy home valuations? It could mean bad things. Sure, there are still tons of foreign buyers snapping up townhouses and condos in Manhattan; but that's still a small fraction of the people who live on the island. So... eventually... either we get a new extreme high wage-paying industry to employ lots of people.... or finance resurges in Manhattan.... or rents are going to have to come down.

It has been a strange year in Manhattan so far. Rents slipped quite a bit in November to a new 7 year high, which is par for the course, but Manhattan landlords were introducing incentives as late as February 2014.
According to Elliman's monthly report, May 2014 vacancy rates were just a tick lower than May 2013, and actually .13% higher than April 2014.  Some articles made mention that Brooklyn rents and Manhattan rents came close to equal during this time, suggesting that many Manhattanites are decamping to Brooklyn. But ultimately, it may simply be that rents are just too damn high, especially since the people who could afford the sky-high rents, and all the amenities, are less and less likely to be working in Manhattan.

I'm not saying that rents are going to fall off a cliff. New York is still the place to be and many people from all over the world locate here. And there is still a housing shortage, albeit an affordable housing shortage. The first developments to be squeezed will be the mid-range developments, those renting for $3500-$7000/month. The danger is that we might start to see more high end rentals than affordable developments, for the same reason that high end condo developments have proliferated in this city over middle class ownership housing: the middle class is getting squeezed, wages are falling, and the rich are the ones we can count on to have money.

But the 1% is only a single percent, so eventually rents will have to fall a little. Or even a lot. At least until New York finds its next big wage paying industry.