Property Grunt

Tuesday, July 21, 2009

I'd hate to be a landlord right now

This is what a landlord in New York City is feeling.

This is in today's NYT.

Stores Go Dark Where Buyers Once Roamed

I see two takeaways.

“I’ve never seen such an across-the-board problem,” said Lorraine Nadel, a lawyer who has represented tenants and landlords for 18 years. “Store owners can’t pay their rent, and they can’t keep their businesses going.”

It has long been difficult to run a small business in Manhattan, but a number of struggling store owners cite high rents and their landlords’ unwillingness to negotiate as the leading obstacles to their survival.

“It’s a crisis,” said Stephen Null, director of the Coalition for Fair Business Rents, which has been promoting legislation to protect small businesses in lease negotiations since 1984. “Lease renewals are the single biggest killer of small businesses in New York City.

There are two reasons why landlords are charging insane rents.

1. The costs of being a landlord are going up. From higher taxes, mortgage payments and certain operating costs, everything just costs more.

2. With less tenants, they have to squeeze whatever remains of their tenant pool to make up the difference.

The closing of stores has started to chip away at the city’s tax collections. Sales tax revenues have declined by 3 percent through May, to $4.15 billion from $4.3 billion the year before, according to the city’s Office of Management and Budget.

This is very, very significant. During the last recession, Bloomberg carpet bombed landlords with taxes and other fees. Why? Because he could. Remember, real estate is illiquid. You can't move your building to Florida to avoid taxes.

And the say the recession is over?