Online EXCLUSIVE: Incentives a Mystery to Many

To a commercial broker who sells or leases space outside traditional Midtown, it might seem that financial incentives available through the city would be an obvious draw for prospective tenants looking to relocate. But to hear Franklin S. Zuckerbrot tell it, what might seem like a no-brainer to real estate professionals may be a mystery to their clients. Alternately, he says, even if the tenants have heard about the incentives, they may not act on that knowledge.

“I’m actually surprised by how many people come to us with a lack of awareness” about the benefits they may be entitled to, says Zuckerbrot, president of Long Island City-based Sholom & Zuckerbrot Realty. “Companies come out here from Manhattan to look at a property, and no one has educated them about the different processes they can go through and different programs that are available.”

In the outer boroughs, those programs include tax credits for relocating to those areas, reductions in energy costs and exemption from real estate taxes on increases in assessed value of eligible commercial buildings. Similar programs are available in designated areas of Manhattan, including Downtown and north of 96th Street.

For tenants that are relocating or expanding, Zuckerbrot says, “Some programs have a ‘con’ aspect along with the ‘pro’ factor—there are tradeoffs. But at least tenants should go through the process of understanding it, and by and large, most of the programs are still net beneficial. The cons might include paperwork, some upfront costs, lawyers, things like that. But in the final analysis, some of these incentives are particularly lucrative, especially if you have a sizable employee count. Many of them are tied in to your employees—for example, savings off your tax returns based on your employees.”

While many of the incentives are intended for small businesses rather than large corporate tenants (although there are energy-saving tax breaks and other breaks for big employers), economies of scale do enter into it. “For a guy who’s opening up a warehouse with three or four employees, it’s not that big a draw,” Zuckerbrot says. “It depends on your business. It’s the same with office: there are enormous benefits to coming out to areas such as Long Island City that can equate to $15 to $20 per sf off your rent if you’re in a high-density use. Those figures would be for a super high density situation, but all of them are at least $10 off for office space use.”

Part of the job of understanding what incentives could mean is grasping the city’s rationale behind offering them. “The city tries to act as master planner,” Zuckerbrot says. “If they’re saying to you, “Look, we really don’t want you operating in this part of the city but we do want you to operate in that part of the city,” you have to understand what that means, evaluate the incentive package and what effect it would have for your business to move, then make the rational decision.

Zuckerbrot says that lack of awareness is not the only reason relocating tenants pass up the incentives program. “So many people hear about it, but then they don’t actually go through the process,” he says. “Part of what we do as brokers is to help them orchestrate that process and get them to the right kind of professionals early in the game, not late. That way, if they’re looking for certain incentives, they’ll know whether or not the property they’re looking at qualifies for the incentives they’re interested in. To me, that’s half of the brokering business, more than just finding the property.”

Among the most familiar incentives available from the New York City Department of Finance, the Relocation and Employment Assistance Program provides a tax credit for businesses that relocate from outside of the city or from Manhattan below 96th Street to either Manhattan above 96th Street or in Brooklyn, Queens, the Bronx, or Staten Island. There is also a REAP available for lower Manhattan. Certain conditions must be met; for example, the property to which the business relocates must be either eligible for the city’s Industrial Commercial Incentive Program, leased from the New York City Industrial Development Agency, owned by the city or leased from the Port Authority of New York and New Jersey or the New York State Urban Development Corp.

The Energy Cost Savings Program is an energy discount program administered by the city’s Department of Small Business Services. The program reduces energy costs for businesses that relocate to previously improved buildings in Manhattan above 96th Street or in Brooklyn, Queens, the Bronx or Staten Island, or make improvements to the properties after they’ve moved in.

For business relocating to lower Manhattan, the city offers breaks such as commercial rent tax savings, sales tax savings and rent reductions for leasing space at existing or future World Trade Center properties.