How’re We Doing?

In most cities, people want to know how their downtowns are doing in the wake of the pandemic. But in New York, it gets complicated. 

Start with the nomenclature. In Manhattan, “downtown” can mean either a geographic area (south of 14th Street) or a direction (south). There are several major commerce districts, not all in Manhattan. The top three are Midtown, the Financial District and downtown Brooklyn. 

So we asked local real estate attorneys for report cards on the health of all three.

Midtown

New Yorkers will never forget how eerily abandoned Midtown was at the height of the COVID-19 shutdown. But Deborah Riegel, a real estate attorney at Rosenberg & Estis, points out that the rise of online shopping had already presented challenges for stores. “Even pre-pandemic, there was a slowdown on the retail side,” she says. “There were retail vacancies, there were tenants who were restructuring leases.”

The pandemic accelerated the decline. “Obviously, nobody was walking into retail stores,” Riegel says. Restaurants could only do takeout business. “A lot shut down temporarily; many of them just failed,” she notes. The emptiness of office buildings affected all the supporting services around them.

“Coming out of the pandemic,” Riegel says, “people started coming back to their offices, but very, very slowly initially. I haven’t seen anybody who’s mandating five days a week back in the office. That continues to be a problem for restaurants, for delis, for any kind of service that was supported by the massive [Midtown] office population.” 

Nevertheless, she says, when she goes to her Midtown office, “it doesn’t feel quiet anymore. It’s getting harder to get restaurant reservations. The theaters are busy again. There is still vacant retail, and there are a lot of vacant restaurants, but we’re starting to see an uptick in office leasing recently. Hopefully it’s a trend.”

The Financial District (FiDi)

“I think there’s a large distinction between FiDi and Midtown,” says real estate attorney Karen Scanna, whose office at Hogan Lovells is in Midtown, but who worked in FiDi for 27 years. She feels that people not coming to work is less of an issue in FiDi, “because you have these experiential things that will draw people, together with the fact that people actually live here. A Whole Foods just opened up,” she says. “They had a Barbie pop-up in Pier 17 in the Seaport. There are just a lot of different places to go.”

The difference between Midtown and FiDi, she explains, goes back to the aftermath of 9/11. “The buildings [in FiDi] were empty, nobody was coming into the office. FiDi went through this quote-unquote transformation. The neighborhood got diversified, and they started converting some of the older office buildings to residential. In order to do that, they got various state and federal subsidies, and the city—and maybe the BID and the Lower Manhattan Alliance—promoted it as a neighborhood. The term of art is ‘live/work/play.’”

Scanna believes Mayor Adams would like to remake Midtown into that kind of neighborhood, “but it’s not easy to convert [to residential] in Midtown,” she says. “It’s very hard to get the light and air that’s required in order to have a residential occupancy.” There’s also a need for additional infrastructure, such as plumbing, for conversions.

Then there are regulatory challenges. Current Midtown zoning laws prohibit conversions in buildings built after 1961, she notes (in FiDi, it’s after 1977), and the city mandates affordable units in conversions. “Once you start layering in the affordability requirements,” Scanna says, “it becomes almost cost-prohibitive. So, without the government stepping in and assisting this, I’m not sure how to get Midtown to a place where you can have this live/work/play environment.”

Downtown Brooklyn

Developers and the city are both committed to creating a multifaceted environment in downtown Brooklyn, and it’s well on its way, says real estate attorney Laura Mehl Sugarman at Benesch, Friedlander, Coplan & Aronoff.

“I’ve worked on a number of developments in downtown Brooklyn,” says Sugarman, who is seeing both affordable and luxury developments. “The city seems to be putting a lot of capital into making it accessible, making it pretty and interesting, and improving transportation. That makes it easier for people to live there, but also to work there.”

On the Whole

Overall, New York City is on the upswing, Sugarman and Riegel agree.

“For a period of time, there was very little transacting going on,” says Sugarman. “There was more modification of the old, and some people wanting to pay less for a while, people wanting to get out of deals, there was just too much unknown. But very quickly for me—like, shockingly quickly—things started to pick back up again. I am seeing, from a professional standpoint, people are still transacting. And this is at every level: residential, office, retail.”

Adds Riegel, “The overall feeling I have is that things are pretty much back to pre-pandemic normal, except that there are a lot more empty storefronts.

“A big part of living in New York is being out on the street, not being on a highway in your car. I think that, as the restrictions eased, particularly once the vaccines started, people were just ready to be out again. Because the city’s like a whole personality in and of itself.”