By Patrick Hedlund
Retail rent control? A city councilmember planned to introduce a bill this week that will require small businesses and landlords to submit to arbitration in negotiating lease renewals if both parties can’t agree on a fair rent.
The far-reaching measure, sought by Upper Manhattan Councilmember Robert Jackson and deemed by some as a form of commercial rent control, would set regulated increases not subject to landlords’ whims.
The language of the proposed legislation — which mirrors a similar bill introduced in 1988 that fell one vote short of Council approval — looks to preserve small businesses in the current commercial landscape by prohibiting both short-term lease renewals and “rent gouging by greedy landlords.”
According to the measure, lease renewals would be set at a minimum of 10 years unless otherwise agreed upon, and arbitration would only be triggered if either party disputes the law’s set rent-increase rates. Those rates, the proposed plan indicates, allow for no more than a 3 percent rent increase the first year; no more than a 15 percent increase by the last year of the lease over the previous lease; and no more than 3 percent incremental increases each year of the lease.
The legislation would be applied on a case-by-case basis to all commercial tenants across the city, including manufacturing businesses, nonprofit organizations, performing arts and theater groups, retail establishments, service businesses and professional medical offices.
When asked about the measure’s chances of success, Jackson’s chief of staff, Susan Russell, said she believes “the provisions are reasonable,” but acknowledged the language is subject to tweaking. “I think that this is something that’s worth sitting down at the table and talking about.”
Supporters claim that, in the current climate, small businesses can’t survive because real estate speculators artificially inflated property costs over the years, allowing landlords to seek astronomical rents.
“You cannot allow unchecked speculators to control any segment of your economy for 25 years and not expect people to suffer,” said Steve Null, a former small-business owner who helped write the current bill and the original measure in the ’80s. In the period between then and now, he said, 137,000 small businesses in the city have been issued eviction notices, not including the about 200,000 to 300,000 businesses “that didn’t want to fight and just walked away.”
“I don’t know a businessperson in New York City that would ever recommend a friend to open a business in New York City,” Null added. “It is so anti-small business that the odds of them surviving would be very slim. … This bill is going to bring that dream back.”
Real estate reality Prognosticators have declared New York City’s real estate boom officially bust with the economic tumult currently gripping the housing and financial sectors, marking the first period of stagnancy since 9/11.
According to recent reports, a chill has been sent through the industry following the housing crisis and subsequent Wall St. meltdown, halting development as wary financiers back away from a once seemingly impervious market.
“Everything’s frozen in place,” Steven Spinola, Real Estate Board of New York president, last week said in article in The New York Times, which cited actions like HSBC’s recent withdrawal from a deal to move to Larry Silverstein’s 7 World Trade Center and the stalling of other major moves as uncertainty sets in.
For example, large chunks of office space will become available in Lower Manhattan following the widespread layoffs and turmoil on Wall St., portending a bleak commercial and residential future for Downtown.
“A lot of financial people chose to live in the Downtown market because of the ease of being able to walk right out their door to their office,” REBNY C.E.O. Daniel Baum told The Real Deal. “So it wouldn’t surprise me to see sluggish sales in that area.”
Vacancy is expected to rise for office space citywide, and overall rent prices are expected to drop on the bearish horizon.
On the residential side, properties like the massive Stuyvesant Town and Peter Cooper Village complexes have declined in value by an estimated 10 percent, according to a recent rating by Standard & Poor’s. Progress on megaprojects like the Hudson Yards and World Trade Center will also reportedly be staunched during the slowdown as the country enters into a recession.
Manhattan had remained relatively insulated from the nationwide housing slump before last week, with some market reports indicating robust activity and only slight slippage in some areas.
Wall St. confidence At least one Lower Manhattan development doesn’t appear to be nervous given the current economic crisis. The team behind the landmark building at 14 Wall St. has begun to market its four tower floors, putting an additional 140,000 square feet of residential space online Downtown.
“The leasing success of the lower floors at 14 Wall Street has created solid market confidence in this building as we enter the second phase of our leasing program,” said Joshua Zamir, managing principal of Capstone Equities, the building’s co-owner, in a pre-meltdown statement from mid-September.
The landmark 37-story building, directly across the street from the New York Stock Exchange, was more than 95 percent occupied on its base floors before putting floors 22 through 25 on the market.
Major tenants of 14 Wall Street include Bank of America, Skidmore, Owings & Merrill, TheStreet.com, Time Warner Telecom, NYU Medical Center, Sciame Development Inc., and True Religion Brand Jeans, which recently leased 700 square feet of ground space.
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