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Wall Street Journal / Biz - Money

Why Garment District Landlords Oppose Zoning Rules Protecting Apparel-Manufacturing Space

Owners of commercial property in the Garment District support a city proposal to end the zoning protections that preserve apparel-manufacturing space, saying the number of manufacturers in the area is shrinking.
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Keiko Morris

Textile companies once made up a third of the Kaufman Organization’s tower sitting on Seventh Avenue in Manhattan’s Garment District. Today there is one textile company left and no manufacturing taking place there, according to the company.

That’s the main reason why owners of commercial property in the Garment District support a city proposal to end the zoning protections that preserve manufacturing space in certain areas of the neighborhood.

“It’s a shrinking market, and to limit building owners to renting to tenants that don’t exist doesn’t work,” said Steven Kaufman, president of Kaufman and a board member of the Garment District Alliance, a group of landlords and businesses in the area.

The 1987 preservation requirements has limited owners’ ability and willingness to invest in and upgrade properties, restraining growth in rents and property values, building owners said.

Banks are leery of lending for buildings with such restrictions or with tenant usage that violates the zoning mandate. An analysis by the Real Estate Board of New York, which represents the real-estate industry, showed the city will have lost $129 million in property taxes between 2008 and 2018 and another $124 million in the following five years.

The proposal to lift the zoning mandate has drawn fierce opposition from fashion-related businesses and those who want to preserve affordable space in the neighborhood for garment-production businesses. A committee of district stakeholders has recommended shrinking the amount of space preserved as part of its suggestions for the city to support the garment industry in the neighborhood.

“What we’re advocating for is the protection of one tiny piece of the fashion industry because it is the most vulnerable,” said Elizabeth Goldstein, president of the Municipal Art Society, an organization focused on planning and urban development policies. “We do believe the rest of it can thrive if that piece is protected.”

But landlords say larger economic forces are at work.

Marty Meyer, a principal at real-estate firm Meyer Equities LLC and an owner in the district, had a manufacturing tenant recently ask for an early lease termination because he is closing the company. That space now will be used as a showroom by a tenant paying about 50% more in rent.

“It’s not the owners who are chasing out tenants,” Mr. Meyer said. “It’s tenants who aren’t able to survive.”

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