Insight

Big Updates in the Big Apple

A Post-COVID-19 update on the commercial market for landlords, building investors and retail developers in New York.

Abstract skyscrapers and buildings in multi-color
Nina M. Roket

Nina M. Roket and Thomas D. Kearns

February 20, 2023 12:00 AM

Just recently, Marc Halliday of SL Green, a major New York landlord, stated at his shareholder’s meeting that “the hybrid work model has persisted for longer than I expected it to.” Office leasing is showing signs of activity, but office building valuations remain in flux as investors question lease renewals in the short term and the recent interest rate increase’s impact on prices. Between the rise of remote work and a surge in e-commerce, the overall trajectory of commercial markets poses both new opportunities and challenges.

Class A office buildings that are highly amenitized are seeing robust leasing activity, while older buildings remain a challenge. Recent reports show that 80% of all office workers are in the office at least three days a week. Employers seem prepared to accept such part-time office attendance but often want all employees together on those dates, translating into the same office space as the traditional model. The final result of the evolution of the post-pandemic office occupancy rates and their effect on lease renewals is not yet determined, and office investors seem to be on the sidelines waiting for further clarity. Retail remains an enigma—everyone wants their neighborhood to have great retail space—yet vacancies remain high. Retail rents have moderated, but perhaps not quite enough to encourage retailers to sign long-term leases.

The building code and political issues involved, however, are daunting."

Meanwhile, other parts of the commercial real estate market are active. The residential rental market remains strong, bolstering apartment building values and transactions. New York remains very popular with tech, finance, legal, media and other workers, particularly young workers. We are also seeing several decades-old residential property partnerships formed under pre-1986 tax changes using the high valuations to sell out to partners while absorbing the tax hit in order to simplify family holdings.

Commercial properties that are industrial were not as severely impacted by the pandemic and remained heavily utilized and will continue to grow amid the surge in e-commerce. And despite concerns about the overall economy, the life science sector will likely continue to grow and push up demand. Even tourism and hotel occupancies have rebounded, though they still remain below pre-pandemic levels.

Perhaps the most fascinating development in New York is the current political dance between regulations, politicians and the industry about re-positioning older properties, particularly office and outmoded hotels, to purely residential use to help with affordable housing and reinvigorate business districts. The building code and political issues involved, however, are daunting. Should light and air codes be relaxed? How much of the converted use should be set aside as affordable, and what level of affordability is appropriate?

The notoriously difficult re-zoning process in the city may be loosening up. The City Council has had an unwritten understanding that the local council person in each district would have a veto over any development in his or her district which involved any re-zoning or other discretionary Council action. Tortured negotiations often ensued over each project, and the local councilperson often said “no,” no matter what affordable housing or other concessions were made by the developer. After several high-profile developments with extensive affordable housing set-asides voted down, the political winds might be changing at least gently. A more pro-business mayor, together with a significant and growing housing shortage seems to be pushing the Council to be more realistic and less deferential. A large re-zoning in the Astoria neighborhood of Queens, famous for vociferously objecting to the Amazon’s possible arrival a few years ago, was recently approved albeit, with a highly affordable housing component.

Meanwhile, perhaps taking advantage of the more difficult financing markets for new construction projects, at least one not-for-profit affordable housing developer is seeing more availability in development sites. City, State and federal affordable housing financings have become more accessible since there is less of a “sign here now with a big non-refundable deposit” market.

Thomas D. Kearns is a partner in the Real Estate Law practice at Olshan Frome Wolosky LLP in New York, NY. With significant experience in both real estate and corporate law, Tom represents owners, operators and developers in the acquisition, development, ground leasing and financing of office, residential and retail properties. He has been selected by his peers for inclusion in The Best Lawyers in America® in the field of Real Estate Law since 2019.

Nina M. Roket is a nationally recognized commercial real estate lawyer at Olshan Frome Wolosky LLP in New York, NY, where she serves as co-managing partner, member of the Executive Committee, Co-Chair of the Real Estate Law Practice, Chair of the Leasing Practice, Chair of the Hiring Committee and Chair of the Women’s Committee. Her practice focuses on leasing, conveyancing and finance transactions and restructuring situations. Nina has been selected by her peers for inclusion in The Best Lawyers in America® since 2021 in the field of Real Estate Law.

Headline Image: Adobe Stock/DG

Related Articles

The Commercial Conundrum


by Brion J. Kirsch

Even prior to 2020, commercial real estate was experiencing setbacks. Coupled with the challenges of new working environments and less need for commercial spaces, landlords are left with increasingly vacant buildings to fill. Below is a primer on how to move forward.

Pile of old chairs and office equipment with blue backdrop

Does the Crystal Ball Predict a Fall?


by Kathleen Bernardo

In the post-pandemic climate, economists are making many predictions about what’s to come for the housing market. But one real estate lawyer with decades of experience says that this reset was crucial and not necessarily indicative of the doom and gloom we thought we were facing.

Multi-colored houses with purple backdrop

IN PARTNERSHIP

Foiled Plans: How Adam Leitman Bailey, P.C. Thwarted A Famous Building’s Trickery


by Rebecca Blackwell

When the Frick building, planned renovations that would threaten the welfare of nearby residents, Adam Leitman Bailey, P.C. jumped in to uncover the truth.

Front of the Frick Building in New York City

4 Essential Steps for Commercial Real Estate Due Diligence


by Best Lawyers

Due diligence in real estate is essential for all parties. Best Lawyers walks through the key steps of effective due diligence in commercial real estate.

Animated magnify glass in front of building and checklist

IN PARTNERSHIP

Adam Leitman Bailey Saves Upper East Cooperative From Forced NYU Combination With Neighboring University Building


by Rebecca Blackwell

When a New York resident of an iconic building was faced with a potentially devastating renovation to his beloved home, powerhouse real estate lawyer Adam Leitman Bailey tightened the knot on the loophole others said didn’t exist.

Large brownstone building with blue sky above in New York City

Inflation Escalation


by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

Electric Vehicles and Zoning Laws


by Aaron S. Evenchik and Robert A. Cooper

As electric vehicles become more common among drivers, so too will charging stations, both in abundance and location. Where these stations are placed, though, could present several challenges and potential impacts on zoning laws.

Fuel pump and electric car charger with red and blue backdrop

Rising Transfer Taxes


by Angus C. Beverly

Transfer taxes in California are becoming a statewide trend with potentially national implications. Here is a breakdown of the effects in several cities.

State of California in orange with city in backdrop

A Look Ahead


by Jarred Boyer

The future of U.S. rental markets may seem uncertain as we continue to grapple with the after-effects of COVID-19, but renters and landlords alike can look toward a more hopeful few years as inflation already begins to recede and the promise of stabilization is on the horizon.

Paper houses and crane sitting amongst coins and money

Under Pressure


by Antonios Roustopoulos and Sara T. Wagner

Capital markets commercial real estate is under pressure, and creativity is needed to make deals in 2023.

Two corporate employees standing near window with cityscape

Infrastructure Restructure


by David A. Lum

Developers are embracing creativity and ESG to continue their real estate projects amidst a backdrop of inflation, supply chain demands and pipeline issues.

Two figures standing in construction site

Foreclosure Exposure


by Lindsay Mesh Lotito and Zachary J. Manasia

New York recently passed new legislation surrounding foreclosure law, but questions linger about how much it will help—or hurt—those it affects.

Wallet, safe and house in front of blue background

Measuring Success by Results


by John Fields

Recognized Best Lawyers®* recipient Joseph F. Brophy on how his Firm determines success.

Measuring Firm Success

"Lawyer of the Year"


Texas "Lawyer of the Year" 2022

Charla Truett

Immigration Law

Dallas/Fort Worth, TX

2022

Tales From the Crypto


by Gregory Sirico

The economic turmoil of COVID-19 has given cryptocurrency its moment in the spotlight. But are we, and more importantly our banks, ready for it?

Cryptocurrency on the Rise During

IN PARTNERSHIP

The Benefits of Hiring an Attorney After a Car Accident


by James D. Payer

Hiring a car accident attorney is about maximizing the compensation you recover from the at-fault party. Learn more about the benefits of hiring a lawyer here.

Nighttime image of two crashed cars in street covered in broken glass

Trending Articles

How Palworld Is Testing the Limits of Nintendo’s Legal Power


by Gregory Sirico

Many are calling the new game Palworld “Pokémon GO with guns,” noting the games striking similarities. Experts speculate how Nintendo could take legal action.

Animated figures with guns stand on top of creatures

Announcing the 2023 The Best Lawyers in America Honorees


by Best Lawyers

Only the top 5.3% of all practicing lawyers in the U.S. were selected by their peers for inclusion in the 29th edition of The Best Lawyers in America®.

Gold strings and dots connecting to form US map

The U.S. Best Lawyers Voting Season Is Open


by Best Lawyers

The voting season for the 31st edition of The Best Lawyers in America® and the 5th edition of Best Lawyers: Ones to Watch® in America is officially underway, and we are offering some helpful advice to this year’s voters.

Golden figures of people standing on blue surface connected by white lines

How To Find A Pro Bono Lawyer


by Best Lawyers

Best Lawyers dives into the vital role pro bono lawyers play in ensuring access to justice for all and the transformative impact they have on communities.

Hands joined around a table with phone, paper, pen and glasses

Announcing the 2022 Best Lawyers® in the United States


by Best Lawyers

The results include an elite field of top lawyers listed in the 28th Edition of The Best Lawyers in America® and in the 2nd Edition of Best Lawyers: Ones to Watch in America for 2022.

2022 Best Lawyers Listings for United States

2021 Best Lawyers: The Global Issue


by Best Lawyers

The 2021 Global Issue features top legal talent from the most recent editions of Best Lawyers and Best Lawyers: Ones to Watch worldwide.

2021 Best Lawyers: The Global Issue

What the Courts Say About Recording in the Classroom


by Christina Henagen Peer and Peter Zawadski

Students and parents are increasingly asking to use audio devices to record what's being said in the classroom. But is it legal? A recent ruling offer gives the answer to a question confusing parents and administrators alike.

Is It Legal for Students to Record Teachers?

Best Lawyers: Ones to Watch in America for 2023


by Best Lawyers

The third edition of Best Lawyers: Ones to Watch in America™ highlights the legal talent of lawyers who have been in practice less than 10 years.

Three arrows made of lines and dots on blue background

The Best Lawyers in Australia™ 2024 Launch


by Best Lawyers

Best Lawyers is excited to announce The Best Lawyers in Australia™ for 2023, including the top lawyers and law firms from Australia.

Australian Parliament beside water at sunset

The Upcycle Conundrum


by Karen Kreider Gaunt

Laudable or litigious? What you need to know about potential copyright and trademark infringement when repurposing products.

Repurposed Products and Copyright Infringemen

Wage and Overtime Laws for Truck Drivers


by Greg Mansell

For truck drivers nationwide, underpayment and overtime violations are just the beginning of a long list of problems. Below we explore the wages you are entitled to but may not be receiving.

Truck Driver Wage and Overtime Laws in the US

Inflation Escalation


by Ashley S. Wagner

Inflation and rising costs are at the forefront of everyone’s mind as we enter 2023. The current volatile market makes it more important than ever to understand the rent escalation clauses in current and future commercial lease agreements.

Suited figure in front of rising market and inflated balloon

Best Lawyers Voting Is Now Open


by Best Lawyers

Voting has begun in several countries across the globe, including the United States, the United Kingdom and Europe. Below we offer dates, details and answers to voting-related questions to assist with the voting process.

Hands holding smartphone with five stars above phone

A Celebration of Excellence: The Best Lawyers in Canada 2024 Awards


by Best Lawyers

As we embark on the 18th edition of The Best Lawyers in Canada™, we are excited to highlight excellence and top legal talent across the country.

Abstract image of red and white Canada flag in triangles

Announcing The Best Lawyers in South Africa™ 2024


by Best Lawyers

Best Lawyers is excited to announce the landmark 15th edition of The Best Lawyers in South Africa™ for 2024, including the exclusive "Law Firm of the Year" awards.

Sky view of South Africa town and waterways

8 Different Types of Criminal Defenses in Law


by Best Lawyers

Learn about the different types of criminal defenses available in law, including innocence, self-defense, insanity and more. Protect your rights today.

Silver handcuffs laying on finger printed papers