Last week, The Federal Reserve cut the interest rate, which has shown to be a good thing. This cut is going to continue to boost the city’s economy. This move has been described as a “preemptive move to protect a record-long economic expansion amid global risks.” This is good news for the market on Wall Street and it could provide a increase to the city’s commercial real estate market. However, the bad news is that this cut has already been priced into the costs for investors in the New York market. Buyers and developers will still have to deal with a range of factors, for example, high-end condos are facing a slow sales market, and buyers of apartment buildings now must consider the new rent laws.
Flagships are Losing Their Appeal
Once considered a retailer’s crown jewel, flagship stores are now disappearing from Manhattan to Chicago because of rent increases and the shift to online shopping. Some stores include, Gap, Tommy Hilfiger, Lord & Taylor and Polo Ralph Lauren, have closed their flagships on Fifth Avenue. Instead of abandoning it all together, stores like Nike, opened a huge store on Fifth Avenue last year that doesn’t have any cash registers. Customer’s can see details of items by scanning the QR code and then having them delivered to a fitting room or designated pick up spot. Levi Strauss & Co. now offers larger dressing rooms with call buttons and tailors ready to add trims and patches right there. However, more stores are losing the race to online shopping, including Barney’s, who just filed for bankruptcy. Rents have increased so much that many retailers can no longer justify staying in the luxury spaces. The vacancy rate shot up to 7% from 3% in 2017. The net number of retail square footage lost is 353K, flying by the 214K loss of SF in 2009.
NYC Real Estate Taxes are Going to Rise
In July, New York City real estate taxes were due. However, this year, the taxes were full of surprises and errors. While people are told to pay their taxes as issued, the city is now telling taxpayers that they can self-correct and pay what should be the appropriate amount. For property owners, managers, and title companies that used the old DOF system have now proved that it is useless. Most of the concerns and comments are due to the new legislation for residential property owners. Many people call to see if their 2019/2020 NYC tax commission protest hearing had already taken place. Apartment buildings will 11 or more units (including commercial units) are assessed using the trailing calendar year performance. Because of this, any residential proper-assessment will increase rather than decrease. Many clients with retail spaces have called to report the potential loss of a tenant due to the continued negative retail climate. While retail landlords look forward, the city assessor looks back at the 2018 performance for now and weigh vacancy if it was for a full year.