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City needs retention plan for all tenants.

Tenant retention is probably the most central problem currently confronting the real estate industry. It goes beyond making building upgrades, writing generous workletters or offering extended periods of free rent.

At present commercial real estate seems to be extremely active in reshuffling the current deck of tenants. Large transactions, of which Galbreath Riverbank has had a significant share, continue to be completed, but when you examine the bottom line you see that we are still tending towards a negative absorption rate in Manhattan.

Many 100,000-square-foot deals are being done by companies who formerly leased 120,000 square feet. Smaller or mid-sized companies that close or relocate virtually get no attention at all.

In this mayoral election year, we must hold our candidates to a higher standard. Many issues essential to the real estate industry, such as occupancy taxes and other commercial rent regulations, have languished and must be put back in the forefront of the debate.

As the real estate and business community suffers, so does the rest of New York City as our tax base continues to erode.

Thus far the city lacks a coherent tenant retention program, and has effectively done nothing to address this issue with regard to smaller and mid-sized companies.

Larger, more prestigious firms are obviously in a better position to use their negotiating muscle to cut better deals with New York officials when reviewing their local presence or status. However, most concessions are agreed upon on an ad hoc basis and are won from the city strictly case-by-case.

Under this present system and without a coherent tenant retention program, businesses who have a commitment to .New York wind up being penalized while those who flirt with leaving the City every few years are given tremendous rewards.

Recent downsizings and re, structurings by larger companies left many New Yorkers out of work. Many of those who were directly affected rose to the occasion and mustered their entrepreneurial spirits to begin small businesses in their own areas of expertise. Many of these businesses have run up against the city's onerous tax code which include strange real estate taxes and regulations that discourage these new businesses from flourishing.

Smaller and mid-sized companies, which generally have tighter budgets than do larger companies, have little clout or leverage and are left to pay full price. As President Clinton stresses, it is from this sector of smaller businesses that most job creation and expansion comes.

This disparity should be cause enough for the City to take notice and reevaluate the way it does business. It is an issue that the Real Estate Board of New York's Economic Development Commission is tackling head-on under my chairmanship.

It is time to stop playing the politics of scarcity and begin dealing with the basic issues behind the current problems with New York business and real estate.

Before we can even begin looking to attract future tenancies, the core issue of maintaining New York's existing tenancy base must be addressed.

Last year, REBNY officially proposed a tax incentive program for all New York businesses that would cut a company's tax liability $500 for each new employee added to the payroll over the next three years. The credit would be renewable each year for 10 years, providing that the newly created jobs are still carried from year to year.

In addition, New York City currently has 14 business taxes, many that are peculiar to this municipality alone and serve as a disincentive for businesses to stay or relocate here. We must begin to reexamine our tax laws to formulate a wiser, more prudent system that encourages business, and thus real estate.

New York City is a great place to live and an even greater place to do business. It is time that our city officials began acting like it and addressed the concerns that are sending many companies looking elsewhere.

We must all get behind REBNY and send a strong, clear message to both of the major candidates for mayor that an effective tenant retention program is essential for New York and makes good sense as well as good business.
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Title Annotation:Mid-Year Review & Forecast, Section I; evaluation of leasing commercial buildings in New York, New York
Author:Mosler, Bruce E.
Publication:Real Estate Weekly
Article Type:Column
Date:Jun 23, 1993
Previous Article:Housing plan dedicated.
Next Article:Market dynamics adjust as tenants trade-up.

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