Bottom Line: NYC CRE should leverage its failures

By Adam Pincus OPINION

There’s an old study from the 1960s that any Psych 101 student will recall, which is that people like people more when they see their vulnerabilities. It’s been dubbed the pratfall effect.

New York City’s commercial real estate industry should seize the moment and highlight it’s weaknesses, failings, shortcomings and vulnerabilities. Trip, fall, groan, then get up again with a sheepish grin.

There is no better time: the industry is in fact suffering from financial blows. And the blows are easy to see. The company Real Estate Equities Corp. bought a net lease for the commercial building 576 Fifth Avenue in 2015 from Savanna for $36 million. Last summer in the depths of Covid, REEC surrendered the lease.

We read daily about landlords suing commercial tenants for back rent and often they note that they can’t re-rent the space for the same rent, as it’s fallen by 20 percent or more. In December 2020, Isaac Kassirer put an 11-property portfolio in bankruptcy, implying that the equity investment in the project was wiped out. And hotel owners are losing properties to lenders with regularity.

Scores of commercial properties saw their “market values” as determined by the city’s Department of Finance decline by 20 percent to 30 percent last year.

However, with the stumbles there often appears a quiet glee of “I told you so” or “serves you right” for promoting a business plan that relied on turnover and raising rents. But missing from the public consciousness is that with that business failure often comes less investment in the building, which translates into less work for contractors, less cosmetic or even necessary rehab work for the structure.

So to announce the industry’s pains, a brief ad-buy from REBNY or the Rent Stabilization Association is not going to do the trick. The industry is loathed in a way that even Hollywood or the Tech Industry is not.

This is the moment to push back on the demonizing of all owners and developers, best exemplified and promoted by the de Blasio administration’s 2019 Housing Stability and Tenant Protection Act ad campaign did, which implied they were liars and cheats.

The industry should coordinate with effective messaging through monthly billing emails, paper bills and building entryways to explain the pain, and ask tenants to reach out to their City Council member and ask them to support the battered industry.