Real Estate Forum - July August 2011

NEWS FRONT
Law Firm Activity in NE Heats Up

NEW YORK CITY—Law firms account for a substantial amount of the office space leased in many northeastern cities—12% in Manhattan, for instance, according to Jones Lang LaSalle. As class A space becomes scarce, leasing activity has picked up in a game of musical chairs.

JLL cites a “window of opportunity for
the largest firms” in Manhattan that “could
diminish by 2012, as class A large blocks in
the best buildings could become scarce at
current absorption rates.”
The Manhattan market has claimed sev-
eral mid-sized and larger deals in recent
months. The SJP Properties-owned 11
Times Square alone has pulled in Zukerman
Gore Brandeis & Crossman, which is taking
17,144 square feet in the 40-story tower, and
Proskauer Rose, which inked a whopping
406,000 square feet in a tiered, 20-year
lease. Farther Uptown, Morrison & Foerster
in late May committed to 180,000 square
feet at Boston Properties’ planned one-mil-
lion-square-foot 250 W. 55th St.

Industry Scores Regulatory Wins in Albany

The New York real estate industry had a number of important accomplishments in the New York State legislative session that ended on June 24. For the first time in 15 years, the state adopted a budget that reduced spending below the level of the previous year. The $132.5-billion budget was adopted on time and reduced overall spending by more than 2%. More important, it eliminated a $10-billion deficit without raising taxes, without new borrowing and without budget gimmicks.

Gov. Andrew M. Cuomo, Senate Majority Leader Dean Skelos and Assembly Speaker tax cap that would control the growth of taxes for businesses and homeowners. This cap, however, does not apply to New York City.

Yet the city will benefit from the renewal of two major economic development plans, the 421a Partial Tax Exemption Program and the Industrial and Commercial Abatement Program. These will encourage capital investment in new housing and commercial and industrial development and offset the heavy burden of our real property tax system.

The legislature renewed a 50% reduction in the transfer tax for conveying a property to a REIT. This reduction has facilitated the formation of REITs in New York and a surge in overall transfer tax revenue.

After many unsuccessful attempts, the legislature passed a bill to site power plants. This legislation would allow development of new,

By Steven Spinola

more energy-efficient power plants to meet the energy needs of our growing city. We will urge the governor to sign it into law.

The renewal of rent stabilization laws preserved an owner’s ability to deregulate apartments above a fixed threshold and avoided the proposals of the tenant advocates. These proposals would have virtually eliminated the deregulation of rent-stabilized apartments. Rent stabilization was extended to June 15, 2015.

Nevertheless, the real estate industry is disappointed that our leaders in Albany did not pass a proposal that would have permit-ted the owners of 80/20 buildings to cap their real estate taxes at 20% of their building’s gross income if they kept their low-income units affordable for another 30 years. This would have preserved as many as 5,000 affordable units.

Similarly, we thought the legislature missed an opportunity to address the chaos in the rental housing market resulting from the Court of Appeals decision in the Roberts vs. Tishman Speyer J- 51 case. This 2009 decision maintained that apartments receiving J- 51 benefits could not be deregulated. The proposed J- 51 legislation would return these units to rent stabilization, establish a mechanism for determining rent and overcharges, and bring order and clarity to the owners and occupants of the 40,000 units affected by the ruling.

The real estate industry had many important accomplishments in Albany in 2011. When the legislature returns later in the year, we will pursue passage of the J- 51 legislation and strongly advocate for the 421a cap provision and restoring 421a benefits to high density zoning districts.

Steven Spinola is president of the Real Estate Board of New York. He may be contacted at sspinola@rebny.com. The views expressed here are the author’s own.