Federal tax breaks key to rebuilding downtown

Real Estate Weekly, Nov 14, 2001 by Elaine Misonzhnik

According to the panelists at the Young Mortgage Bankers Association "Rebuilding Downtown" luncheon the federal government will have to give the city a great deal of financial help if Lower Manhattan is to become a viable business district.

The aesthetic problems associated with the Ground Zero site and the difficulty of transportation make it hard for businesses to remain Downtown, so New York will have to offer them significant tax breaks and an improved commute to convince them to stay at their buildings.

Carl Weisbrod, president of the Alliance for Downtown New York, pointed out that in addition to firms that have moved out of Downtown all together, those that stayed are being pressured by their employees to find alternative space. "There are concerns about .air quality not so much about, safety - but about the smell. It's, a constant reminder and it affects the mood of the employees," Weisbrod said. "The amenities have seriously eroded, particularly high-end retail, most of which was concentrated in the World Trade Center mall. There are surface access issues, even in areas outside the frozen zone, and there are transportation issues. As a consequence, there are many companies that. are now on the edge. And (we have to) provide direct cash infusions to companies, employees, and residents (to make them stay.)"

Weisbrod's proposals included new bus routes within Manhattan and increased docking space and size for ferries, as well as tax breaks for people who live south of Canal Street. Downtown's residents. are key to.. Downtown's revitalization, he stressed.

"Many of the residents have not yet returned home," Weisbrod said. "Many of them are negotiating lower rents. As a commercial strategy, we have to keep high-end residents in Lower Manhattan. They are dictating where their companies are located, so they are of critical importance."

John Powers, vice chairman of Insignia/ESG, addressed another critical issue faced by Downtown - too much available space. "Right after Sept. 11, the first reaction was that prices would increase. Then, two days later we saw the most dramatic demand shift - the prices were under heavy pressure downward," he said. "We found that there was a tremendous amount of space. In 1999 and 2000, the corporate side overbought space, particularly in New York, because of centralization. That huge projection of demand was not realized. In an average year, about 1O%-15% of the space on the market is sublease space. That number is now moving to over 40%, maybe higher."

According to Powers, there are several large, class "A" office buildings Downtown that are only 30-40% occupied. The problems that he thinks should be immediately addressed are transportation and the plans for the World Trade Center's cite future.

"In the short-term, the biggest problem is transportation," he said. "In the mid-term, we need active government involvement - relief packaged of up to five years. And the other thing is to have some clarity as to what is going to happen with the World Trade Center. If you tell business what's going to happen there three months from now or a year from. now, they can deal with it. But (commercial) tenants; don't like risk and they don't like uncertainty."

Also speaking at the luncheon was Michael G. Carey, president of the New York City Economic Development Corporation. He expressed his conviction that New York will be able to recover and announced that the city has received $700' million from the government in development money.

"We got almost everything we asked for from the government," he said. "In the long-term, were are working with the Senate finance committee for a stimulus package. In terms of tourism, New York will not be back until the airline industry settles' down. But I believe that we will recover and we will come back stronger than before."

Caleb D. Koeppel, president and chief executive, officer of KTR Newmark. Real Estate Services, serviced as the moderator for the Event. The meeting took place on Nov. 8, at the Cornell Club.