Ellen Israel, Nadja Galloway and Michael Kaufman are confident: New York City will come back from the turmoil brought on by the coronavirus pandemic, and companies will continue leasing office space here.
They say they’re each seeing it on the ground day to day in their various commercial real estate roles.
Israel is executive managing director of JRT Realty Group Inc. Kaufman is partner at Kaufman Leasing Co. And Galloway is director of office leasing and sales at Time Equities Inc.
The three joined the New York Business Journal recently for a panel discussion on the future of New York’s office market. I moderated the conversation.
Here are some of the discussion’s highlights.
Israel sees some parallels between how companies and New Yorkers reacted after the Sept. 11, 2001, terrorist attacks and how they’re reacting to the pandemic now.
“Companies started moving out of Manhattan. UBS moved to Stamford. Goldman Sachs went and built a building in New Jersey. Everyone moved their data centers out. People left the city. They thought it was always going to be a target and they moved to the suburbs,” Israel said. “The same flight happened then as it did now and several things started to happen.
“After a while, when the security was implemented and people got used to it, companies started coming back. People moved back because they realized they were bored in the suburbs, and the city had everything that they needed.”
After Sept. 11, there were people who moved into the city, such as into new buildings in Battery Park City, and made the most of the situation.
“A whole new slew of people came in because New York City is still New York City,” Israel said. “People might leave now. They might stay in their houses in the Hamptons and the Catskills and wherever they are, but eventually, when this is in our rearview mirror and there is a vaccine — and I don’t want to get political, but the political landscape changes — people will be back.”
To Israel that means there are people out there making the most of the market — and the tech companies grabbing space are among them.
“The tech companies are clearly smarter than the rest of us,” she said.
Kaufman made a similar comparison to the financial crisis of just over a decade ago. His company had bought a building at the bottom of the market that was only half leased. It managed to sign a deal with a company that Apple acquired, and Kaufman later sold the property fully leased.
“We sold that building 26 months later, a $92 million purchase, at $231 million,” Kaufman said. “When Facebook and Apple take these type of purchases or leases, however you want to call it, these are world leaders.”
“They have the money and the resources to make these decisions in an opportunistic environment,” Galloway said.
Galloway said she’s seen interest from medical groups, financial services and tech companies. She’s particularly seen a lot of activity for office space between 2,500 and 5,000 square feet.
Israel has been seeing a lot of interest in the outer boroughs, like in the Bronx, where companies can pay less in rent, may have access to parking, and can tap into the city’s Relocation and Employment Assistance Program, which uses business income tax credits to encourage companies to relocate from Manhattan.
“We’ve seen everyone from small food manufacturers to large schools that their lease is not up this year, but they’re starting to think about where they should go when their lease is up and acquiring properties at a better rent than they could have five months ago,” Israel said.
Kaufman said for him, so far, tenants have fallen into three categories. One, companies like accounting, law, engineering and tech firms are renewing leases for a year or six months. Two, some tenants are looking to downsize their footprints. And the third is larger companies that are looking to take advantage of the deals available.
“You have people who have leases coming up in the next could be three to seven months, and the more stable or historic type companies are out smiling at this market, and saying, ‘Look at these deals, look at this sublease, look at the $20, $30 discount I can get anywhere and everywhere,'” Kaufman said.
Kaufman, Israel and Galloway all said they’re seeing more interest from prospective tenants now than a few months ago.
“The last bunch of weeks have been quiet, but optimistically, I’d say over the past two weeks, I’ve seen a steady uptick in activity, inquiries, even showings are starting to happen,” Kaufman said.