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Industry looks for signs of recovery.

Industry looks for signs of recovery

While government economists were optimistically predicting that the recession was over last May, savvy New Yorkers still do not believe a word of it.

Donald J. Trump said "I don't think they know what they're talking about. They say it but I don't think they believe it." Trump did add that he hoped it was so because the city has problems.

Ronald K. Shelp, president and CEO of the New York City Partnership, said, "I hope we're getting close to the bottom but I don't think so."

A recent poll of New York State residents conducted by Penn & Schoen Associates on behalf of the Fleet/Norstar Financial Group, found 89 percent still believe we are in a recession. But a survey of CEOs of some of the fastest growing businesses across the country conducted by Coopers and Lybrand noted that 64 percent were optimistic regarding economic conditions during the next 12 months. The "Trendsetter Barometer" also found that 50 percent of these same CEOs considered increased taxation and a lack of market demand the most probable barriers to continuing company growth.

Donald H. Tack, vice president of Don Alan Realty Associates, which specializes in Long Island City real estate management and brokerage, was also optimistic about the future but concerned about the current state of affairs. "The pendulum swings in two directions," he said, "and I hope we've hit bottom and that by this time next year things will improve. I don't think it's a bottomless pit. At least I hope not."

Currently, Tack observed, "we are spinning our wheels and every month rents are falling." He cited a 25-by-1,000-foot industrial space that had been renting for $2,000 per month and is now renting for $1,700. He added that a lot of work must also be done for these tenants. "There is no confidence," he said. "They are asking for a month-to-month lease or a one-year lease or a one-year lease with a one-year option. They can't see beyond their noses."

Even the most rigid landlords, Tack said, have started to be flexible because "they see the handwriting on the wall." Tack said tenants are falling behind in their rent and have to be "gently prodded" to give a partial payment. "Then you have to sit down and negotiate a lower rental for the end of the lease term," he said. "Their businesses are off 40 to 50 percent.

The president of the New York Board of Trade William J. Sloboda is also observing the plight of the small and medium-size business in the city.

"My personal feeling is that it is not over when each day you still see more restaurants going out of business," he said. "I do applaud those entrepreneurs who, in this very tough time, are opening businesses, but, by and large, we are still in the practice of seeing businesses being caught in the crunch so we are not in a stop or turnaround situation."

Sloboda does believe the turnaround is coming quickly, but added that the real estate situation is not getting better either. "There is a lot of space out there," he noted. "There are a lot of internal negotiations going on with present tenants negotiating for better deals."

Arnold Zabinsky, president of Elm Management, which manages about 100 co-ops and condos all over the city, also believes the economy is getting worse. "I see more sponsors going out and more properties in trouble. I do see that, despite predictions of the end of the recession, the problems, primarily by sponsors, have not gone away yet." Co-ops, Zabinsky said, are still adversely affected by the plight of the sponsors, particularly because some sponsors are continuing to have problems making payments on maintenance. One benefit, he said, is that co-ops are getting more sophisticated in dealing with sponsor defaults and are taking stronger and quicker steps.

Barbara Corcoran, president of the Corcoran Group which concentrates on residential real estate brokerage, said the jury is still out when it comes to the economy. "Real estate in Manhattan is one of the early shiny spots and whether it's short or long term still remains to be seen." Although prices have come down over 30 percent, she noted, there is a price level below which sellers will not go.

Corcoran added that low interest rates accompanied by low prices are causing sale activity, and a lot of deals. "But things are trading at lower prices and could be interpreted as a negative; sellers are disappointed and buyers are leaving with a victory and feel that they were entitled to it. But there are still buyers holding back and waiting for the bottom. The crowd is large enough which has encouraged a lot more sales."

Ruben Klein, president of the Bronx Realty Advisory Board, tells a more ominous tale. "We have a marketplace that is such that nobody wants to buy, or put money into it and it is status quo," he said. "There is no evidence of any improving or anything changing except getting worse."
COPYRIGHT 1991 Hagedorn Publication
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Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

Article Details
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Author:Weiss, Lois
Publication:Real Estate Weekly
Date:Oct 23, 1991
Previous Article:Dinkins selects housing rehabbers.
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