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Experts predicted abysmal rent collection numbers for Q2, but the numbers in April and May turned out to be not as bad as many expected. Have you seen this affect your clients in the CRE space specifically? Are there some sectors that were hit harder than others?

There’s really been some mixed results from my clients in the commercial real estate space, with some collecting a good portion of their rents and some collecting very little. The retail sector has been hit incredibly hard as New York City enters its third month on lockdown and stores which were deemed non-essential had to close to comply with the city’s stay at home orders. I have seen that retailers of different sizes throughout the city—some of which are large national chains—are looking for rent abatements, or to get out of their lease entirely, to keep the company afloat.

What are the biggest questions and concerns from your CRE clients now after more than 2 months since most US office markets shut down for non-essential services?

My clients’ immediate questions are what concessions are sustainable to give to their tenants and if New York City will defer the payment of real estate taxes. Longer term concerns—and therefore more difficult to predict and advise on—are what the city will look like when the phases of reopening begin and how the higher vacancy rates will affect asking rents for their portfolios.

The real estate industry has been largely left out of the economic recovery bills passed by congress. Without federal support for CRE, what will the recovery of the industry look like?

There are a lot of factors at play here and recovery will be dependent on a micro-level, varying on a property by property basis, as owners with a diverse tenant mix will likely fare the best. The number of tenants who will be back in business when the stay at home orders are lifted will ultimately be directly tied to the timeline of the city reopening. The measures New York City will take to reassess property values for real estate tax purposes will play an important role in the economic recovery of the industry.

Real estate taxes are New York City’s greatest source of revenue. With declining rent remittances and the City yet to extend the deadline, how are you advising clients to proceed as the July 1 deadline nears and rent for many tenants has not yet been paid and is in jeopardy?

Property taxes in New York City are due in two installments: the first in July and the second in January of the following year. Since many CRE owners have collected the majority of rent from the first five months of 2020, presumably owners have the cash on hand to pay the first installment of the property taxes, or have escrowed the money, that is due July 1. Therefore, I am expecting the majority of owners to pay the July installment. The big question is what will happen come January 2021 if many tenants vacate or can’t pay rent, and owners won’t have enough funds to pay the second installment of property taxes due.

Do you think a new public real estate initiative could emerge in response to this pandemic similar to the 421a program in the 1980s, or the programs in response to 9/11 that revitalized development downtown in the 2000s? What could that look like?

I think it’s too soon to tell and would be dependent on where unemployment numbers stand when the world turns back to “normal”. If a program does emerge, we may see the incentive be focused on the tenant, rather than the owners, to encourage businesses to open, or re-open, even if business is not the same. While it’s unlikely there will be the same incentives as in the 1980s or early 2000s for new construction, there will probably be a huge push for a public program to subsidize rents for commercial tenants so businesses can reopen and fill vacant retail properties throughout the city.

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