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Some good news, some bad.

Good News .... Bad News

Well, its not all bad news. Some good things are starting to happen:

Property owners are finally wringing substantial tax reductions from the city. Reductions of 25 percent to 33 percent are not uncommon and will result in significant savings to Owners as well as to tenants.

Retailers reported the healthiest holiday shopping season in years. This will mean larger reorders -- a real shot in the arm for the City's Fashion district, its manufacturers, designers, wholesalers and shippers.

Wall Street firms also reported the best year-end since the mid-eighties. Bonuses were unusually generous, right in line with record earnings. So long as interest rates stay low, capital will shun CD's and favor the equity and bond markets.

Commercial banks are now reporting record earnings. Would you believe that Chemical Bank will earn $1 billion for the year ended Dec. 31, 1992.

The bad news is the jobless rate, which seems unaffected by the Clinton election. With little or no rehiring, firms don't have the need for all the space they used to occupy, hence, vacancy rates in Class A and Class B office buildings remain high. The pain that the real estate community is experiencing is only a reflection of the pain which its tenants are experiencing. While these vacancies have allowed property owners to successfully seek tax reductions, if all the reductions which have been sought are granted, then the City will face a significant budget shortfall starting in July 1993. The City should anticipate the problem now and start to cut back its overhead just like owners have had to.

Which takes me to my final point. The name of the game in the 90's is cost reduction. Tax reductions are only example. The recent 32B-J Union settlement provides another example. Owners will now have some flexibility in reducing labor costs (by 5 percent) and in shifting work assignments amongst staff as needed rather than carrying employees whose job descriptions limit their duties. Small but significant steps. Keep ahead of the pack by controlling costs, setting up budgets and holding people accountable. Its how you are going to survive in the 90'S.
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Title Annotation:Review & Forecast, Section II; evaluation of current New York, New York real estate market
Author:Bernstein, Asher
Publication:Real Estate Weekly
Date:Jan 27, 1993
Previous Article:RE market readjustment to begin in '93.
Next Article:Meeting the challenges of changing times.

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