No one leaving New York because of Mamdani, say top real estate CEOs

The views of New York City Mayor-elect Zohran Mamdani have sparked fears that companies and capital will exodus from the city. But two of the city’s most senior commercial real estate executives say that, based on leasing activity and new building investments, there has been no backtracking on the plans since Mamdani’s win became clear, and that’s simply not true, considering the democratic socialists’ official election.

“New York City is back,” RXR Realty CEO Scott Rechler said at CNBC’s Delivering Alpha conference in New York on Thursday. “The people who work here, who live here, feel the energy, they have faith and they have every right,” he said.

“In our business right now, we are seeing CEO after CEO commitment to the city,” Rechler said. “We’re seeing record leasing in office buildings. And that’s not just for next year, but for 2028, 2030, 2032,” he added.

“We will exceed 40 million square feet in commercial office leases signed by the end of this year,” said Bill Rudin, co-executive chairman of Rudin Management. “Companies are growing here,” he said. “We have not seen any decrease in meetings with brokerage firms,” ​​he said of activity since Mamdani’s election. “People ask, ‘Does it have any impact?’ he continues to say. Nobody put down their pen. Nobody calls out moving trucks. Companies are expanding and taking up space,” Rudin said.

A good example: Hedge fund billionaire Ken Griffin of Citadel Securities is known for being outspoken with his conservative political views. Rudin with Steve Ross Vornado Real Estate and Griffin breaks ground on a new two-million-square-foot office building at 350 Park Avenue. “Ken is committed and will have more employees at 350 Park than in Miami,” Rudin said. Although the plans pre-date Mamdani’s rise, Rudin noted that they recently applied for a building permit and Griffin is also a partner in the project: “So he’s moving forward and he’s very excited about it and very interested in the design and development of the project. … How so?” Rudin added.

RXR Realty signed a 300,000-square-foot lease with a law firm that will move in 2029, and Rechler noted that the firm came back last week after the election and said they needed to expand another 200,000 square feet. JPMorgan’s new building needs 5,000 more workers beyond the 10,000 it can currently accommodate.

Rechler noted that his firm already has an anchor tenant for a 2.8 million-square-foot project that will replace the Hyatt hotel in the 2031-2032 timeframe. “People believe in New York,” he said. RXR has $7 billion in project financing and “you can’t understand it if people don’t believe in the future of New York,” he added, but said it might require “a little bit of a longer lens.”

But even now, following Mamdani’s election, he said the right word to use for tenants in the high-end office space market is “urgency” to sign deals; is hearing reports of companies signing year-long leases that would normally be agreed within 21 days. “That’s the market. … a tremendous pipeline on the office side. I’ve never seen in my entire career, I’ve never seen tenant demand as strong as it is right now,” Rechler said.

“The information we have in real time as of today and yesterday is that tenants are still in the market and looking for quality, quality spaces,” Rudin said.

One reason for the positive outlook of the New York real estate market is the need to attract and retain young professional talent.

“The people they want working at companies are here in New York City,” Rudin said.

“Every young professional wants to be in New York,” Rechler added, pointing to the 1.5% vacancy rate in the city’s multifamily real estate market. “People want to be here,” he said.

The views of the mayor are not without reservations, with both property managers meeting with him.

“Mamdani is not necessarily consistent with the capital of capitalism,” Rechler said. “That’s the biggest risk. We have a man who is not a character but a caricature,” he said, adding that this could easily make Mamdani be described as a socialist with no experience and only knowledge of social media.

This is a development, Rechler says, especially among overseas institutional investors. “They all have a lot of anxiety when I leave the city and travel the world,” he said. “This could impact foreign investors who are investing in multifamily projects in New York. They hear ‘rent freeze,’ they just hear that word… and maybe there could be a pullback there,” Rechler said, referring to the fact that the mayor has the power to appoint officials to a board that oversees these policies. he said.

That perception has led some institutional investors RXR has talked to about major investments in New York City to “stand back and say they want to see how this plays out,” Rechler said. He added that the tone of these conversations indicates that there may be a “cooling in capital flows” among these investors.

“I’ve been to the Middle East and Europe and the first thing people want to talk about is Mamdani,” he said. Rechler also sits on the board of directors of the New York Fed and said the topic of conversation was the same. “They want to talk about it in the New York Fed boardroom, and their globe-trotting staff is being asked questions as they travel.”

But real estate CEOs stressed the fears appear exaggerated for a city that has survived and prospered through Covid, the financial crisis, 9/11 and the Bill de Blasio administration. They also noted that New York had a budget of $60 billion when Michael Bloomberg was mayor. There’s now a $116 billion budget, which makes them believe Mamdani may be more realistic in his approach to governing than his campaign platform suggests.

“When he first started running, there was no private sector in housing. He gave up on that now,” Rudin said. He added that when “Ed Koch, a very liberal Greenwich Village congressman” became mayor, he realized he needed to move downtown to get things done. “Hopefully, Mayor-elect Mamdani understands that he has to manage and operate a $116 billion budget,” he said.

Rudin said the issues raised by the incoming Mayor, such as housing affordability and availability, are legitimate issues and “we’ll try to work with him.”

“What’s driving Mamdani’s success is the same thing that’s driving Trump’s success,” Rudin said, appealing to a disenfranchised segment of the economy, especially among young people who feel they won’t have the same economic opportunities as previous generations. “There’s frustration with big companies and the government, and they want an answer,” he said. “Now, the Mayor-elect has given them a simple answer, and frankly it’s really not feasible,” he said.

However, Rudin noted that since Mamdani’s previous campaigns, he had retreated from the policy of completely dictating housing by the government and expressed a desire to work with the private sector, adding that now “it is our duty to show him how to create the housing we need.”

“I talked to him before the election,” Rudin said. “My sense is that he is a very smart young man who is willing to listen and hear feedback on issues.”

The housing affordability crisis will not be an easy crisis to solve. Mayor Eric Adams’ administration set Mamdani to success last year by changing zoning laws across districts, Rudin said, but real estate executives say changes to both wages, labor unions, sustainable development policies and tax provisions that make building over 100 units less financially attractive are all problems getting in the way. “So there has to be a moment where workers, the governor, the city council and the mayor have to come together… if they want housing and we need it,” Rudin said.

Property executives cited Covid-created tax incentives allowing the conversion of former office buildings into residential properties as another area where they can collaborate on affordable housing construction, with those incentives tied to buildings retaining 25% of units for affordable rents rather than market rates.

Rechler noted that despite Mamdani’s tax wealth, in reality New York’s governor has had significant fiscal authority over the city since the financial crisis of the 1970s. “At the end of the day, the governor has the veto pen on taxes,” Rechler said. “I had breakfast with him yesterday and he said income taxes will not be increased on his watch.”

He added that there will be political pressure on Gov. Kathy Hochul, given her own election needs.

“We have a governor’s race in a year, and he needs to serve as a firewall, and if he doesn’t do that, he won’t be governor in a year,” Rechler said. he said. “The governorship election will be about Mamdani.”

For now, Rechler said, perhaps the most telling thing about his interactions with Mamdani is a comparison to how former New York City Mayor Bill de Blasio interacted with business leaders as his star was rising.

“I met with [Mamdani] He came prepared for an hour by himself and was transitioning from a campaign to a management mindset and said all the right things,” Rechler recalled of a meeting in September when the election outcome was clear to him. “The proof will be in the pudding, but he realizes he needs to move towards public-private partnerships, that’s the only way to build the kind of housing he wants.”

“I want to compare this to when I met de Blasio,” Rechler added. He said it was a meeting of 12 businessmen, and the former mayor “looked around the table of businessmen and said, ‘none of you elected me and I’m not here to serve you.'” And we lived with it for eight years. This guy at least starts with ‘I know I need business people to work together to be successful.’