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Despite leasing upswing, NY's still got problems.

Though the commercial market has recently experienced an upswing in leasing activity, New York still has severe problems that must be addressed in order for the city to remain competitive.

As a result of the recession, the real estate decline, and advances in technology, corporations are finding that a New York presence is no longer as critical as it was in the past. Though few areas are able to compete with this city's Status as a major gateway to Europe because of its location and accessibility, other cities on the Eastern Seaboard have much to offer and fewer negatives. To counteract the exodus of companies leaving the city, we must face our problems and address them with a new sense of urgency.

Our real estate taxes still remain the highest in the nation on a per-squarefoot basis. Whenever the budget is short, the city responds by raising real estate taxes and transportation costs, and cutting back on essential services such as the police and the fire department to make up for the shorf fall. The resulting costs are passed along to consumers and businesses, driving people away.

Today, New York City office tenants are paying $30 to $44) per square foot for space that currently rents for $20 to $30 per square foot in areas with lower taxes and better quality-of-life benefits. Con Edison is one of the nation's most expensive utility companies, and this cost combined with our rental rates and real estate taxes have made the cost of operating office buildings more expensive than those in virtually any other metropolitan areas.

When a major corporation threatens to leave, the city usually responds with incentive programs. But what about corporations that are here and provide jobs? Where are the incentives for them? In the past, every major corporation felt that having a New York location was imperative to the success and prestige of its business. As one of the world capitals for finance and industry, it seemed as though New York City would always be a contender.

But now, countless companies have relocated back office operations elsewhere because there is no incentive to remain here. After all, advances in computers, faxes and modems permit a company to serve its business just as well from back office space in less expensive areas.

Another problem that has contributed to our high vacancy rate is the profusion of sublease space on the market. Now, developers and owners not only have to compete against one another to lease direct space but against their own tenants.
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Title Annotation:Commercial Sales & Leasing; New York, New York real estate market must address issues including real estate tax rates, transportation costs and lack of essential services provided by city government
Author:Irlander, Ben
Publication:Real Estate Weekly
Date:Mar 24, 1993
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