The Panic Attack of the Power Brokers
The future of real estate when the city’s office buildings are empty.
One I Yards, $25 met late-august billion Eliot former the Spitzer lavishly real-estate New York at morning, subsidized development Hudson governor Facebook funds, firm Pfizer. that and offices, will the I found pharmaceutical one investment him day house at the base draped where of an across a unfinished marketing the scaffolding skyscraper, banner read gingham Spitzer reset shirt, was expectations. and wearing bookish a mask, horn-rimmed a green glasses. builder, business having The former returned after governor self-destructing to his family’s is now realestate in politics. He since had the been middle talking of the to me summer, intermittently analyzing deep personal the pandemic investment as someone in the health with of a the coming city. back “I don’t to these know buildings,” when people Spitzer are said a mixed-use as we strolled project north he is toward constructing the site in of partnership the main developer with the of Related Hudson Companies, Yards. “At first, a three-week the optimists shutdown, were saying, and by ‘This Labor will Day be it will be back to normal.’” Now the emergency evacuation had settled into a state of semi-permanent dispersal.
That day, the city would record just 281 cases of covid-19, close to its low since the pandemic began, and life in the city’s residential neighborhoods had returned to a pleasant rhythm, with people dining on the sidewalks and Instagramming sunsets in the park. But the whirring core of Manhattan still felt weird and abandoned. It was a little before 11 a.m. on a weekday, and there was not a single office worker in sight. Chairs were stacked on tables inside the Maison Kayser sandwich shop at Hudson Yards, where a sign on the door read closed until further notice. The chain was bankrupt. So was Neiman Marcus, which had recently announced it was abandoning the 50-year lease on the department store it had just opened in the Hudson Yards mall. Only 8 percent of Manhattan’s 1 million office workers were now estimated to be back at their desks, compared with 20 or 25 percent in other U.S. metro areas. Around Times Square, where almost a quarter of the retail locations were available for lease this spring, disorder and vagrancy had crept into the negative space.
The present crisis encompasses aspects of every challenge New York has faced in recent memory. Like Sandy, it is a natural disaster. Like the 2008 financial crisis, it has caused a surge in unemployment and
a“PERMANENT GOVERNMENT” HAS ALWAYS BUILT ITS WAY OUT OF CRISIS. BUT WHAT IF IT CAN’T?
The Panic Attack of the Power Brokers By Andrew Rice
poverty. Like 9/11, it is a mass-casualty event and a psychological trauma. As in the 1970s, the city government faces a fiscal crisis with tax revenue projected to plummet. And it is all wrapped around an unprecedented crisis of authority, which confounds any attempt to organize a response.
“We presume that since New York has been the epicenter for as long as we can recall, that there is an inevitability to that fact,” Spitzer told me. “And yet there isn’t. This is the first moment when I seriously worry about the city’s place—economically, culturally, socially—because the social fabric of the city is being torn apart.”
Spitzer led us to West 35th Street, where concrete mixers were churning outside his development site. “See the foundation walls?” he said, as we peered through a little window in the plywood barrier surrounding the construction. “That is going up 50 stories, and a year and a half thereafter, this building will be occupied.” Phase one of the project is a residential tower. Phase two is the office building; it will need to sign an anchor tenant in order to go forward. For now, that part of the site was occupied by a white tent: a covid testing center.
Construction is one of the few industries that have continued mostly unabated, but history shows it to be a lagging indicator. Real-estate projects take years to design, finance, and build, and they can be overtaken by unexpected events. Spitzer said he was “shoring up the bulwarks” at his company, slowing down future developments until the economy strengthens. “If there’s a 10 percent drop in office demand,” Spitzer said, “it’s going to ripple through the market in a very real way.”
In past crises, the city has tended to build its way out of its problems, offering substantial subsidies to developers and corporate tenants to revive Times Square and reconstruct the World Trade Center. When the 2008 crash hit, the city spent hundreds of millions of dollars to backstop the finances of Hudson Yards, ensuring that the most expensive real-estate development in American history would continue forward.
Government officials saw projects like Hudson Yards as necessary engines of the city’s prosperity. “If you believe that growth is good, Hudson Yards is spectacular,” Spitzer said. Launching new office construction when almost no one is going to offices every day may seem ludicrous, but that is the way New York’s political class has always approached the process of recovery, assuming that the city—and demand—will inevitably rebound. That premise is now up for question. The longer all those skyscrapers remain empty, the less essential they seem. At the same time, a new class of progressives is successfully crusading against corporate power and megadevelopments. As the largest contributor to the city’s tax base, and a major campaign contributor, real-estate developers have grown accustomed to having sway over issues of economic development. But the insurgents were opening the Overton window and shoving them right out.
As a Democrat and a developer, Spitzer was stunned by the reversal. “What’s wrong with building a building?” Spitzer asked, as we watched a crane lift a piece of steel up the face of the new Pfizer headquarters. “Where did this city come from?”
If the entire real-estate industry is filled with anxiety, there’s still a hierarchy of distress. The multigenerational family companies, like Spitzer’s, tend to be less heavily leveraged, which should allow them to ride out the pandemic. (Or so they say—they’re extremely private companies, so who knows?) The public real-estate companies are more exposed to market forces. SL Green Realty, which opened a $3 billion office tower next to Grand Central in September, has seen its stock price fall by nearly half since the pandemic hit, and its latest SEC filings warn that the “severe disruptions” from covid could continue to depress rents.
More imperiled still are the adventurous investors—the ones who are building condo towers catering to foreign billionaires or who borrowed heavily to buy high on speculative trends. Spitzer broke down the math: “If you bought a building presuming that you’re getting paid $100 a square foot—presumed the next year the rent was going to be $110, went to a bank and borrowed based upon the $110, and then suddenly your rents go down to $70 and you need $80 in rent just to pay your mortgage and operating expenses—you’re finished.”
Also finished, in all probability: anyone dependent on restaurants, shopping, or tourism. Jared Kushner’s family firm, for instance, is in danger of losing the retail space it owns in the old New York Times Building on West 43rd Street. The state of the hotel industry, which has come to almost a complete halt, is ruinous. “How long can people stay submerged without running out of oxygen?” asked Vijay Dandapani, the president of the Hotel Association of New York City. Around 140 of the city’s 700 hotels have been rented to the city as homeless shelters, Dandapani said. Many have closed, and he estimates that “well over 100” will never reopen. Broadway theaters, a major tourism driver, are dark. The industry’s trade association announced last Friday that it was shifting the target date for reopening to the end of the spring; a source familiar with the plans said even that was unrealistic, given the unique challenges presented by live theater. “Believe me,” he said, “we are far from theaters being opened by June 1.”
Office landlords are in a comparatively insulated position, since the industry practice is to sign long-term leases. But some are more vulnerable than others. In recent years, many older buildings have been repositioned for co-working, which has been devastated by the pandemic. Many small firms and start-ups have been unable to pay rent. “There’s been a lot of pain, a lot of unpleasant conversations,” says a landlord with a large number of troubled startup tenants. “It’s a weird responsibility for me. You’re dealing with hundreds of these people. You don’t have any real information about how to do it. On the one hand, it’s not my job to be a philanthropist, and I’m not their partner. On the other hand, it’s in my interest for them to survive.” He says if there’s “realistically zero or close to zero” chance of renting the space for the foreseeable future, “giving them a big rent break might be psychologically scarring but totally rational.”
“If they don’t come up with a stimulus package now, the smaller tenants are all going under,” says Jeffrey Gural, a prominent office landlord who told me that, like many landlords, he is now willing to negotiate. “The market has changed, and I have to accept that.”
For the large corporate tenants that populate Manhattan’s premier office buildings, there is less flexibility. “One of the great fictions out there right now is that leases contain trapdoors,” says Mary Ann Tighe, the head of the New York region office for the commercial brokerage CBRE. Short of declaring bankruptcy, as Neiman Marcus did, there is little way for tenants to extricate themselves from their legally enforceable leases.
That hasn’t stopped some companies from trying. Condé Nast recently told the New York Post it was shopping around for new space as it asked its landlord at One World Trade Center to bring its rent “into line with current market conditions.” (The negotiations appear to have gone nowhere.) In July, the law firm Simpson, Thacher & Bartlett sued its landlord for $8 million in a dispute over rent of its unoccupied offices. There has been an increase in “shadow” office space available for subleasing— around 14 million square feet currently, according to CBRE—although its share of the overall available market, 25 percent, has not yet reached the glut levels seen
during the 2008 financial crisis.
“It’s phenomenal how much companies can spend on their real estate,” says Joel Steinhaus, a former executive at Citigroup and WeWork. In New York, according to one study, businesses may allocate as much as $25,000 a year per employee for space. What could be taking shape is a system in which desks are optional perks that companies offer to their employees, rather than entitlements that come with a job. The New York technology entrepreneur Kevin Ryan, speaking by phone from a vacation home in France, tells me that at the height of the city’s lockdown, he closed an acquisition without one in-person meeting. (Ironically, the company in question was Meetup.) Already, two of the start-ups in his portfolio have given up their office leases in Manhattan. “There is zero question that the demand for commercial real estate is going to go down, and prices are going to go down dramatically,” Ryan says. “They are kidding themselves if they think it’s not going to be devastating. Devastating.”
The longer the pandemic goes on, the more tenants will have a chance to reassess their need for expensive office space. Little wonder, then, that as soon as the infection rates stabilized, prominent landlords began urging their tenants to come back to the office. In August, Jeff Blau, the chief executive of Related, wrote a Wall Street Journal column saying that companies had an “obligation” to return to work. “The entire essence of this city we all love is at stake,” he wrote.
“This is really not a real-estate issue, quite honestly,” Blau told me. “People who think they’re going to hang out wherever they are—in Connecticut at their parents’ house, in the Hamptons, or wherever—are going to come back in a year expecting to find everything just waiting for them and are going to be in for a real surprise. Because businesses are not going to make it unless they come back now. Their civic responsibility is to make sure that New York is here.”
Office occupancy at Hudson Yards remains stuck around 10 percent. For now, its major corporate tenants are still paying their rent, and Blau said things livened up after Labor Day, when the mall and the Vessel reopened. He contends that even the bankruptcy of Neiman Marcus had an upside. “This was over ten years ago when we planned the retail, and it was a different world,” he told me. Department stores are a dying business, but the open Neiman floor plan, with its terraces and escalators, appeals to the pandemic-era desire for sun and ventilation. Related is now marketing the 380,000-square-foot space to office tenants.
In an effort to lead by example, many real-estate companies masked up and went back to their offices as soon as Governor Cuomo lifted lockdown restrictions in late June. To assuage office workers’ fears, Related installed new building technologies, such as lobby temperature sensors. At Hudson Yards, people can summon elevators with a cell-phone app, so they don’t even have to touch buttons.
Other commercial landlords have been working with their tenants to provide
covid-attuned perks. Tishman Speyer Properties, which owns most of Rockefeller Center, has turned the plaza’s ice-skating rink into an outdoor dining area with food from restaurants like the acclaimed brasserie Frenchette. Some landlords are exploring offering day-care services that can supervise employees’ children as they go through their school day on Zoom.
“People have to get past the point where there’s a zero risk tolerance,” says Scott Rechler, the chief executive of RXR Realty, which owns some 25 million square feet of office space in the New York region. Rechler says about 90 percent of his company’s employees have returned to its headquarters under strict protocols enforced via technology. Facial-recognition software allows lobby cameras to monitor whether people are wearing masks and even whether they are pulled down below the nose. Employee badges track the locations of workers to make sure they keep at least six feet apart. “This is the new abnormal,” Rechler says.
But few corporate executives seem to believe it is their civic responsibility to occupy the very expensive square footage they are paying rent on, especially if it comes at the additional cost of creating strife in their workforce. Among other things, they have to consider their liability if there is an outbreak within their offices. Not every landlord will invest in fancy gadgets, and not every skyscraper can be retrofitted. A large percentage of New York’s building stock dates back 50 or even 100 years, with cramped elevators and untrustworthy ventilation.
A few investment banks started to summon traders back after Labor Day, including JPMorgan, news that inspired a congratulatory tweet from Donald Trump. Four days later, reports emerged that the firm had sent some employees home again after a worker tested positive. (Not long after that, so did Trump.) Everyone wanted New York to get back to work, but wishing wouldn’t make it so. No one—not the president, not Congress, not the mayor or the governor, not the real-estate industry or its increasingly emboldened critics—seemed to be devising a plan to rescue it.
“There is a sense that we are in a cauldron right now,” Spitzer said, “without a leadership group.”
New york has been in the cauldron before, though our collective memory of it has faded. We are now as separated in time from the urban catastrophe of the 1970s as that city was from Fiorello La Guardia and the Great Depression. So it is useful to be reminded what the bottom really looks like. Exodus? The population shrank by around a million residents during the 1970s, leaving entire neighborhoods desolate. Blight? There were 6,000 fires a year reported in Bushwick, many of them arsons commissioned by landlords for the purpose of collecting insurance. Deficits? In inflation-adjusted dollars, the city’s total bond and pension debt reached nearly $100 billion in the mid-1970s, and banks would no longer lend it money.
Back then, the real-estate families organized to save the city’s government—and their own financial interests—by prepaying a huge chunk of property taxes, helping to stave off municipal bankruptcy. The governor appointed an investment banker named Felix Rohatyn to work out the city’s bond debt—it’s still being paid off—and created the Financial Control Board, which wrested authority over the budget from the mayor. Ineffective elected officials were supplanted by an elite group of corporate and civic leaders, a cadre the Village Voice journalist Jack
“WHAT’S WRONG WITH BUILDING A BUILDING? WHERE DID THIS CITY COME FROM?”
Newfield referred to as the “Permanent Government.” Newfield did not mean it as a compliment, but the name stuck and gradually lost its critical overtones.
At least in its own mythology, it is the Permanent Government that asserts leadership in trying times. After 9/11, power over the rebuilding of lower Manhattan was handed to another appointed authority, led by John Whitehead, a retired chairman of Goldman Sachs. During the financial crisis of 2008, Mayor Michael Bloomberg—the living embodiment of the Permanent Government—engineered a onetime suspension of term limits so he could manage the city through the crisis. In each case, New York emerged strong and prosperous.
The key to the city’s resiliency, the members of the Permanent Government argue, is its devotion above all to economic growth and real-estate development. It is growth that produces new tax revenue, allowing the city to provide services to its citizens, making it an attractive place to live and work, creating new growth and development. It is this cycle, they say, that has allowed Mayor de Blasio to govern like a progressive, increasing the city’s annual budget to a record $90 billion, expanding its workforce by some 30,000 people—many of them teachers for his universal pre-K program— and paying for amenities like a heavily subsidized ferry system. Without growth, they warn, it can all disappear very quickly. This summer, facing a tax shortfall, the city cut $100 million from the Sanitation Department’s budget and trash started piling up in the streets. De Blasio scrambled to redeploy garbage trucks.
“People don’t yet realize how perilous it actually is,” said Dan Doctoroff when I met him for a drink at Cafe Luxembourg on the Upper West Side early one evening. Doctoroff served as deputy mayor for economic development in the Bloomberg administration and has spent his life promoting ambitious development initiatives: a plan to attract the 2012 Olympics to New York, the rebuilding of lower Manhattan after 9/11,
Hudson Yards. He now works for Sidewalk Labs, Google’s urban-planning shop. I had always known him to be an optimist—he wrote a book on the city titled Greater Than Ever—so it jarred me when I heard he had been trying to rally the Permanent Government to action, warning the city was on the brink of “a ’70s-style” decline.
“We face a huge risk that the population of the city and the number of people working in the city will shrink by a lot,” Doctoroff said. “Companies are questioning the value of high-cost real estate in New York.” Meanwhile, he added, “many of the drivers of the unique urban experience, like subways and office buildings, are now viewed as risks.” Doctoroff sketched out his doomsday scenario: Residents and companies leave because of resulting in a decline in tax revenue, forcing cutbacks in services, causing the quality of life in the city to worsen, leading to more departures.
If that sounds dire, consider for a moment that veterans of the 1970s crisis are saying that this one could be more threatening than the one the city faced in those days. The urban rot of the 1970s was at the margins; this time, it is the core that is hollowing. Even in the depths of 1977, the year of the blackout and the Son of Sam, Manhattan was vibrant—“a luxury fantasyland,” in the words of one contemporary journalistic account. Manhattan boasted the headquarters of a fifth of the Fortune 500 companies, a third of the largest law firms, and almost all of the big ad agencies and investment banks. Residential real-estate values rose by 30 percent. Celebrities were crowding Studio 54. The Yankees won the World Series, drawing more than 2 million fans.
The paid attendance for the 2020 New York Yankees season, by contrast, will be zero. What’s more, the government so far seems incapable of mustering a response to the current crisis. Cuomo has taken a cautious approach to reopening, focusing on keeping the positive-test rate below one percent. De Blasio appears to be trying to stagger along until November, hoping for a Joe
Biden victory and federal relief funding. The mayor has attempted to address the impact of the pandemic by appointing advisory boards, which have done little of consequence. “Nobody’s rallying around right now,” Doctoroff lamented. He has been trying to organize a new political group he is calling the Coalition for Inclusive Growth, aiming to raise $10 million to shape the debate over the issue ahead of next year’s citywide election. The use of the word inclusive is his way of repenting for the failings of the Bloomberg era, when the benefits of economic development were distributed unevenly to the wealthy.
News of Doctoroff ’s coalition was greeted with some skepticism, in part because the Times coupled its unveiling with news that Stephen Ross, the founder and chairman of Related, was said to be talking about raising $100 million to spend in the coming mayoral election. The rumor was that Doctoroff was his candidate. Doctoroff says he has no interest in running for mayor, and Ross later said he was committed only to “someone not named de Blasio.” But the very notion that the city’s most powerful realestate developer—and a Trump fund-raiser, at that—might try to pick the next mayor sounded like something cooked up at a Bridgehampton clambake.
“These guys have a stake in the gloomand-doom department,” said Alicia Glen, the former top economic-development official in the de Blasio administration. “Because by talking about how terrible it’s going to be, it legitimizes and empowers their vision: superrich white people coming to save the city again. I mean, that is so obnoxious.”
Glen, like Doctoroff, is a member of the Permanent Government. She used to be a managing director at Goldman Sachs and now runs a firm called MSquared, which finances and builds affordable housing, an issue she handled for de Blasio. We met in September by the fountain at Lincoln Center and chatted on a brownstone stoop near her home on the Upper West Side. “I would argue that fundamentally nothing has changed with respect to New York City being, at the end of the day, the center for global commerce and culture,” Glen said. The question, she added, is: “How long until the end of day?”
Already, Glen sees signs that the city is returning to its old profit-driven ways. Opportunistic investors are looking at the pandemic as a temporary dislocation produced by an external force and are assembling huge sums of money to buy New York property. She foresees a coming “feeding frenzy” focused on distressed debts and assets. “When you look at the global picture,
“THE BUSINESS COMMUNITY AND THE ESTABLISHMENT POLITICAL CLASS WILL NOT SAY IT PUBLICLY, BUT PRIVATELY THEY TALK LIKE THE WORLD’S GONE CRAZY.”
people are going to want to buy commercial real estate in New York City,” Glen said. “I’m sorry, that’s the God’s honest truth.”
It isn’t just the vultures, though, that see an opportunity. The pandemic has unleashed a torrent of adaptations, some of which may be here to stay. Outdoor dining is one obvious example. Another is the redistribution of commercial activity to the residential boroughs. Over the summer, the Permanent Government was buzzing about a long-debated plan to expand Industry City, the massive warehouse conversion project along the South Brooklyn waterfront. The private developers behind the project were proposing to build over a million square feet of new office and retail space, which, they projected, would create 20,000 jobs and provide the city with $100 million in yearly tax revenue. The project, which needed no government funding, seemed perfectly tailored to a future in which offices were dispersed around the city, rather than concentrated in a few dense blocks.
The privately financed development required a rezoning, and an ambitious pair of young City Council members were pushing for its approval. “That is the most hopeful thing I have seen,” said Jonathan Rosen, a veteran Democratic campaign strategist and public-relations executive. “The idea that there’s this next generation of leaders.”
The project was opposed by the local City Council member and activists from the Democratic Socialists of America, who argued that it represented the wrong kind of waterfront development. And it received little support from de Blasio, much to the ire of the Permanent Government. Glen was critical of her old boss, accusing him of mishandling an essential part of his job—his relationship with the business community.
“What you’re seeing is that people are so disappointed with the mayor’s leadership,” Glen said. A group of 163 top business executives had recently released an open letter to the mayor warning of “deteriorating conditions in commercial districts and neighborhoods.” At one point, when the mayor was asked whether the mutual antipathy had damaged his ability to respond to the current crisis, he responded by quoting Karl Marx. “He’s so managed to piss off the people that need to be the participants,” Glen said. “He didn’t have a solid foundation to begin with, and when the chips are down, and your behavior is so dismissive, you wind up in the situation where the civic institutions and the business community are all abandoning ship.”
Still, Glen rejected the notion that businesses and the wealthy would give up on New York. is everywhere, and where are they going to go? The real danger, Glen argued, is not that rich people will flee New York but that they will behave so arrogantly that it drives a counterproductive backlash. “Don’t let the increasingly reactionary left use the pandemic to advance an anti-growth agenda,” she said. “You have the old guard feeling super-threatened. The new guard is trying to figure out how to hold off the craziest left-wing stuff.”
We headed up to 72nd Street. It was that first brisk day at the end of summer. The sidewalks were full of people walking with purpose. You could allow yourself to imagine the pandemic was over. That day, though, the head of the Centers for Disease Control and Prevention was testifying before the Senate, managing expectations. He estimated that a vaccine would be widely available by mid-2021. Maybe. “Who’s going to lead us out of the darkness?” Glen asked, before descending into the subway. “That’s what’s so tragic about what’s going on with the mayor.”
The future of the city will depend in large part on three unknowns. One is the delivery date of the still-not-yet-invented vaccine. Another is the result of the presidential election. The third is next year’s citywide election, when not only the mayor’s office but many City Council seats will be open. In that campaign, the question of how the city is to be saved, and for whom, will be central.
“So much of this crisis of covid is about capitalism taking away the little dignity that people have left,” said Zohran Mamdani. It was 9 a.m. on a Friday morning, and we were walking down Steinway Street, where the line outside the makeshift Astoria Food Pantry ran down the block and curled around the corner. Mamdani is a 28-yearold Democratic candidate for the New York State Assembly and a member of the DSA. In April, he turned over his storefront campaign headquarters to a group of volunteers, who are using it to distribute bags of vegetables, canned goods, and other staples. Mamdani has had less use for an office since he unseated an incumbent in the Democratic Party primary in June, all but assuring that he will go to Albany next year.
Mamdani was wearing a KN95 mask, a patterned Nehru-collared shirt, and groovy sneakers. He was born in Uganda, and we were introduced by his father, Mahmood, a scholar of African politics at Columbia University. (His mother (Continued on page 102)
is the film director Mira Nair.) He moved to Astoria two years ago, although he says that as a Muslim immigrant with family in the neighborhood, he feels “this place has been home much longer than that.” He worked as a foreclosure-prevention counselor and put his opposition to the real-estate developers at the forefront of his campaign, promising not to accept money from the industry and pledging to fight its “pernicious influence” in politics. “We need to recognize reality for what it is,” Mamdani said. “Which is that there was a crisis that existed before this pandemic hit.”
Mamdani’s victory was part of a wave of DSA upsets that began with Alexandria Ocasio-Cortez and has since shaken up New York’s political firmament. “The business community and the Establishment political class will not say it publicly, but privately they talk like the world’s gone crazy,” said Vishaan Chakrabarti, an architect and former city-planning official. Like many others, Chakrabarti suggested that the ideological attacks from the left on economic development were naïve—and even dangerous—in the context of a deep recession. “I don’t think it’s centrism; it’s just understanding how things work,” he said. “It’s maturity.”
Mamdani told me he is well aware of how bad things are. “That food-pantry line is not getting smaller; it’s getting larger,” he said. He believes, however, that the pandemic offers an opportunity to imagine another city. “What’s so exciting about the potential of this moment is that it allows us to create a new world,” Mamdani said. “There are so many of these think pieces about how ‘New York is dead.’ And there are aspects of New York that must die.” One of them, he said, is the notion that city government should exist to serve business interests under the pretext of creating economic growth. “That idea,” he added, “of socialism for the wealthy, rugged capitalism for the many, is something that must die.”
We walked down a street blocked off for outdoor socialization, passing a pair of women doing Pilates. “Astoria is very much alive,” Mamdani said. We stopped at a bodega, where he got a coffee and an eggand-cheese, and continued our conversation on the street, standing in one of those cute wooden sukkah-like structures that have been constructed for outdoor dining. “This is something that came about because of the pandemic, and we need to keep it,” Mamdani said, reflecting on the open-air summer as well as emergency-aid measures like free bus transit. “The things that we like, that remain after the pandemic, will be the things that we fight for. If we just sit back, it will be capital that determines the future of the city.”
Hearing this kind of talk, Capital, it’s fair to say, is freaking out. “I agree that the wind is at their backs in terms of them becoming more politically powerful,” Glen told me. “But what I’m struggling with is, What will they do when they get there? It’s not a game. People’s lives are at stake.” Spitzer wryly recalled a time, an era ago, when he was an attorney general crusading against corruption on Wall Street. “Everybody thought I was the bane of capitalism,” he said. “I said, You don’t get it. I’m here to protect capitalism.” Now, as a developer, he’s the left’s enemy.
“Growth is to economics what the law of evolution is to science,” Spitzer said. “Growth and progress are what lift those at the bottom.” Politicians and activists like Mamdani ask what tangible benefit the people lining up on Steinway Street have seen from the government’s estimated $6 billion in subsidies for Hudson Yards. “It’s high time that real-estate developers feel unappreciated, because they’ve been appreciated for too long,” Mamdani said. The DSA’s victories this year, he added, are only a prelude to the coming battle in 2021: “I think that’s what they’re terrified of. Finally, they’re meeting an equal and opposite force.”
Not long after my walk with Mamdani, that force came down hard on the developers of Industry City, who announced they were scrapping their expansion plan after opposition from the DSA and neighborhood groups prompted elected officials to come out against the proposal. The project’s backers were infuriated. “The new generation of progressive electeds don’t have a sense of how dire this is,” said Rosen. “There is no superman waiting in the wings. And while demands for equity are totally fair and in many ways long overdue, the complacency about revenue is frankly terrifying, as someone who considers myself a biggovernment purist.”
A few days after the defeat, I called up the leader of the community group
uprose, Elizabeth Yeampierre, an attorney and activist in the climate-justice movement. She had argued that waterfront development should be restricted to promote environmental resiliency and “green industrial” uses, rather than office space and what she calls a “Chelsea/Williamsburg vision” of retail. “We’ve been hearing, ‘How can these people turn away from these jobs in the middle of covid?’” Yeampierre told me. “Well, are you in your office right now or are you at home?” I was at home. “People are not going back to their offices,” she predicted.
Actually, when I’d visited Industry City a few weeks before the plan fell apart, Andrew Kimball, the former city official who is running the project for its private developers, told me that it was coming back to life, relatively speaking. Because many of its tenants were in light manufacturing and other hands-on businesses, about half of the roughly 8,000 workers had returned. He was even doing some leasing. Whole Foods had taken a 25,000-square-foot space for its first online-only store, where paid shoppers pick out groceries for deliveries.
“How could we not support this at a moment when we are looking at 25 percent unemployment?” Kimball asked. We met up outside the renovated part of the warehouse complex. The scene inside was, in fact, a little Williamsburg-y. Kimball showed me a candy store where masked workers were making chocolates on a conveyor belt, a high-end tattoo parlor, a shop selling raw honey, a whiskey distillery, and a darkened co-working space. “The covid tour is not as exciting,” he said apologetically. Around 90 percent of Industry City’s tenants are small businesses, employing fewer than ten people, and many were barely surviving on emergency federal loans, which were running out.
We went upstairs into the airy, open-plan office of an engineering firm. It was filled with models and diagrams of jobs in progress before the lockdown. A sad cactus sat drooping on a long galley-style desk. Workers had left their pens and papers neatly arranged. Someone’s backpack was leaning against a desk chair. Taped over each computer monitor was a sheet of paper reading workstation closed.
Looking out a window toward the harbor, Kimball pointed out the sights: the new space for Steiner Studios, the Brooklyn Nets practice facility, the sites that would have become office buildings if the city had approved his plan. Of course, it was hard to say when there would be demand for that office space. Kimball directed my attention to a huge parking lot, where a bunch of white tractor-trailers were parked. “That’s the South Brooklyn Marine Terminal,” he said, which is slated to be redeveloped as part of a state-financed offshore windpower project. For now, though, it’s being used as the city’s temporary morgue. Lately, Kimball said, there had been less activity around the morgue. But the trailers are still waiting there, ready for the fall.