Brooklyn's Progress
February/March 2006

BY ALAN H. FISHMAN

Economic expansion, fueled by a building boom that Brooklyn hasn’t experienced since the years after World War II, is now taking place in communities all over the borough.

This growth has been spurred over the past few years by a combination of public and private sector activities. From North Brooklyn to Coney Island, from the Downtown Brooklyn waterfront to East New York, long-hoped-for plans and proposals have moved forward as others have emerged to energize the Brooklyn economy.

In his most recent quarterly report on the city’s economy, New York City Comptroller William Thompson Jr. said we are in our eighth consecutive quarter of expansion. Despite a small increase in inflation, largely attributable to the increased cost of energy – he calls it the Katrina factor – every other indicator is up.

Private payroll jobs in the city grew by 10,800; the unemployment rate continued to decline; and the Gross City Product, our local snapshot of the Gross Domestic Product, showed its eighth consecutive quarter of improvement – on the comeback after eleven straight quarters of decline. Other measurements of economic progress also showed a healthy increase on a year-to-year comparison, including help wanted classified advertising, new building permits, and the Business Conditions Index of the National Association of Purchasing Manager.

Miraculous Turnaround for NYC
Maria Fiorini Ramirez is an economist I have great respect for. She is a regular guest on CNN, CNBC and CBS; is frequently quoted by the Wall Street Journal and other financial media – I am also proud to say, she is a member of the Independence Board of Directors. Last year, in an article in the Brooklyn Chamber’s own Brooklyn Progress newspaper, Maria described the economic renaissance we are experiencing as “a miraculous turnaround.” She pointed out that the current economic expansion is taking place despite a huge real estate tax increase and massive City budget deficits only two and three years ago. And, she pointed out that our economy is also more diversified.

It is heartening to know that experts are bullish on our economy – and to see the statistical evidence about growth trends reported by our City and State Comptrollers. However, the “indicators” I find most interesting are the views of my colleagues in business – our Brooklyn Chamber of Commerce Members – who are on the “front lines” of business every day, dealing with customers in the marketplace.

Members See 2006 Even Better Year
In the recent Brooklyn Chamber Member Issues Survey, 80% of the companies reporting say that their revenues in the first nine months of 2005 were as good as or better than they were last year.

More than two-thirds of those responding to the survey thought their revenue in 2006 would be better or as good as it was last year. Talk about confidence!

Chamber Members also say hiring is also in their plans for 2006, with 68% of the survey respondents expecting to add personnel to their organization – and 31% expecting to hire four or more employees over the coming year.

The past few years have been remarkable in economic terms. But there are a number of factors that will affect the rate of growth in 2006.

One of the most important is the cost of real estate. Interest rates are going to have an important impact on the pace and level of economic expansion, but we need to remember that our progress over the past few years has taken place in the face of successive increases in the Fed rate – and we are probably close to what everybody expects to be a cap at 5% . 

There is a lot of talk about a real estate “bubble,” but savvy real estate professionals in the marketplace and our own people at Independence do not see one. While prices for commercial and residential real estate may be leveling off, there is no sign of trouble in the market – and there is no slackening of demand. Our experience says don’t expect to see real estate prices decline anytime soon – unless there is some external “shock” to the system.

Exciting Things Happening Around Borough
When you do a quick itemization of what is happening around the borough, it is easy to see why expansion of the economy continues at a reasonable pace. Some of these factors include:

• The impact of rezoning in North Brooklyn, which permits residential conversions in some parts of Greenpoint and Williamsburg, but also carves out areas for the preservation of manufacturing and commercial uses.
• The development of Atlantic Yards is also going to have a huge impact – no matter what form it finally emerges in – and which is coming on top of the $120 million investment in Atlantic Terminal complex.
• The reemergence of East New York, Bedford Stuyvesant, and Cypress Hills, where the “risk premium” is declining and there seems to be a land rush to fill every vacant parcel of real estate.
• The building boom along Fourth Avenue, where rezoning is opening up development along this long neglected corridor.
• The arrival of IKEA in Red Hook, the opening of the Fairway Supermarket there, and the adjacent developments north and south along the waterfront from Dumbo to Sunset Park, where new residential uses, big box stores and other commercial development is turning derelict areas into productive new land.
• Plans for Coney Island, which are moving forward at long last, that will help re-energize this popular destination and realize the economic potential of Brooklyn’s historic “playground by the sea.”

One certain outcome that will result from these and many other developments is that there will be a healthy expansion of population – and of commercial and retail infrastructure to support it.

New Opportunities for Retailing, Small Business
Our Small Business lenders at Independence tell me that as real estate and construction associated activity levels off  – as the demographics of many areas has been changed – there has been an exponential increase in new opportunities in retailing and other small business activity.

Independence, for example, is helping finance a huge new Applebee’s Restaurant at Restoration Plaza in Bed-Stuy, where a lot of attention is reviving the “town center” of this community – and along Fulton Street.

I have talked about business and real estate activity, but it is also important to remember that the New York economy revolves around two subjects – land and social issues. We can’t create more land, but the economic expansion we are seeing is the result of putting the land we have to more productive uses.

Social issues are crucial in New York City and the business community must address them for both societal and economic reasons. When we address them, we help ensure the economy will continue to expand. A report by the Community Service Society (CSS) presented recently to the Independence Community Foundation said that recovery for the poor was lagging, despite gains in the city’s economy.

CSS said that in Brooklyn, the poverty rate is 27 % versus 23.7% citywide. Our unemployment rate is also higher (7.7% versus 7.1% for the city, and 5% for the nation). For those on the lower end of the economic spectrum, this translates into such everyday problems as difficulty paying the rent and utility bills, trouble finding a job or deferring needed medical care.

Urban Agenda for Economic Advancement
Community Service Society put forward an Urban Agenda for Economic Advancement that should be a blueprint for action by government and the private sector. It includes investment in affordable housing – and boosting the Earned Income Tax Credit (EITC) to help the working poor. It calls for fixing the schools and revamping vocational education to strengthen tomorrow’s workforce. And for those seeking work and better jobs, it calls for child care and after school programs, “second chance” training for the disconnected and the jobless and a pipeline to jobs created by large publicly aided developments.

Many of these subjects are already being addressed. But we need to do more. Both government and the private sector must understand that no economic expansion can be complete unless it includes all New Yorkers.

In closing, I want to talk about a couple of key things we can do to help ensure the economy will continue to grow. We will pay the cost in progress unless we attack these issues proactively, effectively and aggressively.

Must Keep Industrial Rents Manageable
It is critical that we find a way to keep industrial rents manageable and provide long-term assurances to commercial and manufacturing businesses that they are a vital part of the economy.

The city’s new Industrial Business Zones (IBZ) are a positive step forward, but we also need to increase capacity at such locations at Bush Terminal and Brooklyn Army Terminal. These facilities need to upgraded and expanded significantly if we are to be able to create enough manufacturing space supply to meet the demand.

Our experiences at the Brooklyn Navy Yard, where I am Chairman, demonstrate that when you provide a secure environment and long-term space guarantees businesses will come and stay. We have four million square feet of space that is 100% occupied.

The Chamber also needs to focus like a laser beam on commercial corridors all across the borough where there is space that is underutilized – streets like Fulton Street, where the Chamber’s initiative helped set the pace for revival that now stretches through Fort Greene and Bedford-Stuyvesant.

And, we need to continue to recognize the need to address social issues – especially since some of them have real, bottom-line consequences. I found it particularly interesting that when Brooklyn Chamber Members were asked this year what skills their employees most needed, nearly a third said it was training in the English language!

The year 2005 was a productive year for the economy and I think all of us look ahead with a lot of optimism to 2006.

It is important to remember – particularly in challenging times – that our borough and our city are part of one of the strongest economic engines anywhere in the world.  The inherent strengths we have – and the spirit of our people – will always bring us back to prosperity.

Alan H. Fishman is President and CEO of Independence Community Bank (http://www.myindependence.com/). Since assuming the direction of the Brooklyn-based bank in March 2001, he has led the transformation of Independence into a major regional financial institution by extending its retail franchise, strengthening its management team, adding new financial products and services, and implementing a national expansion of its successful real estate lending business. Mr. Fishman grew up in Brooklyn, attended the borough’s public schools, raised his family there and still lives there. The public-minded Fishman, who serves as President of Independence Community Bank and the Independence Community Foundation, is also Chairman of the Boards of the Brooklyn Navy Yard Development Corporation and Brooklyn Academy of Music, and the former Chairman of the Brooklyn Chamber of Commerce.  This article is adapted from Mr. Fishman's remarks before the Brooklyn Chamber’s 2006 Marketplace Breakfast and Economic Forum held at Bay Ridge Manor on Jan. 20.