FOR IMMEDIATE RELEASE June 11, 2001


GROUP OF 35 REPORT FINDS NEW YORK CITY'S LONG-TERM ECONOMIC GROWTH IS LIMITED BY SEVERE LACK OF AVAILABLE OFFICE SPACE

Sixty million square feet of new office space needed by 2020 to keep pace with projected creation of almost 300,000 new office sector jobs

Report outlines 5-part development strategy to accommodate new growth, including creation of new business districts in Brooklyn, West Side, Long Island City, new zoning and condemnation procedures, new tax incentives, construction for biotech, high-tech sectors

A severe lack of office space poses a serious threat to New York City's long-term growth, according to a report released today by the Group of 35, a high-level panel created by US Senator Charles E. Schumer that includes chief executives and leaders in business, biotechnology, real estate, academia, labor, and government (please see page 4 for a complete list).

The 99-page report, entitled "Preparing for the Future: A Commercial Development Strategy for New York City," estimates that New York City will need 60 million square feet of new office space by 2020 to keep pace with a growing office sector that expects to add almost 300,000 new jobs.

To address the impending shortage, the report recommends implementing a five-part commercial development strategy which includes: (1) removing existing barriers to office development like outdated zoning and condemnation regulations; (2) establishing three new "Central Business Districts" in Downtown Brooklyn, Long Island City, and the Far West Side of Manhattan; (3) creating smaller business districts in all five boroughs; (4) luring biotechnology and hightech companies to New York by offering subsidies and creating new hightech and biotechnology centers; and (5) accommodating the growth needs of the city's manufacturing sector through the creation of a Trust for Industrial Space and other incentives.

"The barriers to new construction and subsequent limited development activity have left the city's office market poorly equipped to meet the economic challenges of the next two decades," the report states. "Without taking action to create more space, New York City will miss out on hundreds of thousands of new jobs and increased economic activity in the next 20 years."

While New York City businesses added hundreds of thousands of jobs in the 1990s - led by a surge in office sector employment - the city's office space inventory grew by only 15 million square feet, compared to 46 million square feet in the 1980s and 54 million square feet in the 1970s. Nearly all existing office space has been absorbed in recent years, sending rents in Manhattan to all-time highs in the first quarter of 2001 and vacancy rates to the lowest levels in two decades. Between 1995 and 2000, 37 million square feet of existing office space were absorbed, pushing rents up 51% and lowering the vacancy rate by 73%. As a result, many businesses are either building new facilities or moving existing operations to New Jersey and other locations outside the city.

To meet the needs of the city's growing economy, the report outlines a comprehensive five-step commercial development strategy:

1. Removing citywide barriers to office development.
The creation of new space is often slowed by overly cumbersome zoning regulations, difficulty in finding sites of appropriate size and configuration, lack of adequate financing for major projects, and high development costs. The report recommends:

1. Rezoning areas including the far West Side and Long Island City to allow for higher density commercial use.
   
2. Permitting the completion of assemblage through condemnation when 85% of a site is controlled and development plans are ready to proceed.
3. Extending the one-year real estate tax progress assessment to three years and enacting a series of changes to the city's real estate tax policies that would promote development.
   

2. Creating three new "Central Business Districts" for new development.
The city's existing business centers cannot meet projected demand of the next 20 years, nor can they offer rents low enough to compete with those in New Jersey and other nearby locales. The report recommends creating three new "Central Business Districts" (CBD) that would create almost 50 million square feet of new space.

Each CBD would feature an "Urban Business Campus" (UBC) with 3-5 million square feet of office space, new retail, dining and entertainment establishments, as well as hotels, parks, and access to local cultural and academic resources; and convenient mass transit access.

The three new CBDs would be located in:

1. Downtown Brooklyn: The Downtown Brooklyn CBD - which would create 12 million square feet of space - would capitalize on the area's mass transit access, proximity to Manhattan, and local business presence at Metrotech. The CBD would be centered on Willoughby Street and would be linked to DUMBO, Brooklyn Bridge Park and the Brooklyn Academy of Music's cultural district. City and state efforts to promote the CBD would focus on rezoning, site assemblage and marketing initiatives to sell the area as an alternative to New Jersey.
2. Long Island City: The Long Island City CBD - which would create 15 million square feet of new space - would take advantage of the area's close proximity to Manhattan and excellent transportation network. The CBD would run along Jackson Avenue and would include a new, world-class intermodal transit station at Sunnyside Yards. City and state efforts to promote the CBD would focus on rezoning, transportation enhancements, mitigating traffic and air quality problems, and promoting retail and residential development.
   
3. Far West Side: The Far West Side CBD - which would create at least 20 million square feet of new space - would be located between 28^th and 42^nd Streets in the area west of 9^th Avenue. The CBD would take advantage of the area's proximity to Midtown, the current, large amount of underdeveloped land, and accessibility to a vast regional workforce. City and state efforts to promote the CBD would focus on improving mass transit access (including the extension of the Number 7 subway line), site assembly, and rezoning.

3. Supporting development in ancillary business districts.
While the new CBDs will serve as the main engine for the creation of new space, the report suggests creating "Ancillary Business Districts" (ABDs): smaller-scale hubs with substantial room for growth. Specifically, the report recommends creating ABDs in:

1. Jamaica: An office center for airline and transportation-related tenants could take advantage of the neighborhood's superior transit access.
2. Flushing: An office center for international business could capitalize on Flushing's diverse local labor pool.
   
3. Harlem: An office center for government and non-profit companies could grow out of Harlem's diverse labor pool, excellent transportation network and recent resurgence.
4. The Hub (in the Bronx): An office center for small business and health care could capitalize on the borough's large health care and education sectors, as well as its strong retail activity.
   
5. Staten Island Corporate Park: An office center targeting the suburban office market could take advantage of Staten Island Corporate Park's unique layout and existing array of private sector tenants.

4. Attracting biotechnology and information technology companies.
While New York City is home to many leaders and innovators in biotechnology, it lacks the infrastructure to attract biotech businesses, and consistently loses out to cities like Boston and San Francisco. To make the city more attractive to the biotech industry, the report recommends offering subsidies for new Biotech Enterprise Centers which would provide facilities for new firms; encouraging joint development projects between academic and medical institutions; and providing tax exempt bonds and other incentives to help biotech companies develop new space.


To help attract and keep new economy and information technology businesses, the report proposes the creation of Technology Enterprise Centers, as well as tax incentives to encourage landlords to make investments in tech-ready space, access to tax exempt bonds and telecom services, and the creation of incubator space within local educational institutions.

5. Accommodating the needs of the city's manufacturing sector.
New York City's manufacturing sector still remains an important engine for the city's economy. The report recommends creating a not-for-profit Trust for Industrial Space that would acquire, renovate and maintain manufacturing buildi ngs; removing obstacles to brownfields development; creating an industrial development tax credit program; redeveloping public sites for industrial use; and funding the "Move Smart" program.


The Group of 35's report was the product of 18 months of research and called on the expertise of experts from the public, private and non-profit sectors. The Group was led by Schumer, former Treasury Secretary Robert Rubin, New York City Deputy Mayor Robert Harding, Taub Urban Research Center Director Mitchell Moss, Federal Reserve Bank of New York Chairman William McDonough, New York City Partnership and Chamber of Commerce CEO Kathryn Wilde, and Group of 35 Executive Director Eric Deutsch. The Group was chartered by Schumer in January 2000 to study the city's office space needs and the challenge these needs pose to long-term growth

The report was released at a news conference today with many of the Group's members, including Schumer; Harding; Moss; Wylde; Michael Carey, President, New York City Economic Development Corporation; Kevin Corbett, Executive Vice President and COO, Empire State Development Corp.; CUNY Chancellor Matthew Goldstein; Barry Gosin, Vice Chairman and CEO, Newmark & Co. Real Estate Inc.; William B. Harrison, Jr., President and CEO, J.P. Morgan Chase & Co.; Thomas Maguire, President, International Union of Operating Engineers; Dennis Rivera, President, 1199 SEIU; Steven Ross, Chairman and CEO, The Related Companies; William Rudin, President, Rudin Management Company; Ivan Seidenberg, President and Co-CEO, Verizon Communications; Stephen Siegel, Chairman and CEO, Insignia/ESG; Steven Spinola, President, The Real Estate Board of New York; Chan Suh, Chairman, CEO and President, Agency.com; James Tisch, President and CEO, Loews Corp.; James Tripp, General Counsel, Environmental Defense; Jay Walker, CEO and Chairman, Walker Digital; Robert Yaro, Executive Director, Regional Plan Association.

Robert Catel, CEO of Keyspan, Kenneth Chenault, CEO of American Express, Fernando Espuelas, CEO of Starmedia Network, Gerald Levin, CEO of AOL-Time Warner, Dr. Arnold Levine, President of the Rockefeller University, Brian McLaughlin, President of the NYC Central Labor Council, Kevin O'Connor, Chairman of DoubleClick, Henry Paulson, CEO of Goldman Sachs, William Steere, Chairman Emeritus of Pfizer, Jane Thompson, President of the Thompson Design Group, and Dr. Harold Varmus, CEO of Memorial Sloan-Kettering Cancer Center also served on the Group of 35.

The report can be seen on line at http://urban.nyu.edu/.

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