The New York Real Estate Industry is in deep trouble
— Prelude to Parshat Behar
In 2017 I prepared a column on Parshat Behar (see below) in which I discussed the difference between “land” and “real estate”. In Behar, the Torah expresses its revulsion at real estate and effectively outlaws such an industry.
Without realizing it at the time, my ideas were prescient. The real estate industry in my native New York is now perched precariously on a precipice. Today, no person in their right mind would invest in a commercial property in New York (or any major metropolis for that matter). This was not the case only three months ago.
An invisible microbe, the coronavirus, is in the process of literally destroying the commercial real estate business, and with it residential property values as well.
During the current pandemic, corporate decision makers discovered that most of their employees were just as productive, if not more so, when they worked from home. Today’s high tech, they realized, makes it unnecessary for most office-based workers – including lawyers, accountants, government clerks and bureaucrats – to commute to costly offices in order to get their jobs done. Indeed, by avoiding the debilitating daily grind of their commute, employees can put in more quality time on the job with far less wear and tear.
When lease renewal time comes, virtually every corporation, law firm and professional practice will seek to lease a mere fraction of the space they currently occupy, thereby enjoying enormous savings – especially in a place like Manhattan where current rent per square foot of office space is around $80.
To illustrate: a small company currently occupying 10,000 square feet is shelling out $800,000 each year on rent alone. There are 400 million square feet of office space in Manhattan, which means an aggregate annual rent role of $32 billion. If corporate tenants reduce their requirements by only 50%, Manhattan is left with vacant inventory of 200 million square feet, and landlords will be losing some $16 billion a year in revenue. And this is assuming the rent per square foot remains at its current astronomic level, which it won’t. Becasue that it the law of supply and demand.
In the past there have been peaks and troughs in the commercial real estate business. These were in synch with economic cycles. But this new crash is not cyclical. It will be permanent. The way business is done will have changed radically thanks to the blessing of hi-tech and the curse of COVID-19. And there is no new source of demand for space waiting in the wings.
Now, if the landlords actually owned their properties it would be bad enough. But they don’t. Most properties are leveraged to the hilt, so there will be no way to meet the mortgage payments when the buildings stand half empty. Banks will foreclose on the properties, and will be forced to literally give the repossessed buildings away at fire sale prices, assuming there will be any demand, which is unlikely. AS for the landlords who believed were the most secure people in the world . . .
This crash will topple the residential market as well. Middle income wage earners are currently forced to spend upward of $4,000 every month to rent a cheerless, cramped, noisy, two bedroom apartment; plus several hundred more dollars monthly for parking space, laundry use, and gratuities.
The only reason such people live in the New York is because of work. The moment it is no longer necessary to show up at the office why not buy a beautiful four bedroom home in the country with an acre or two of property thrown in for good measure? Four grand a month can buy a terrific home, not to mention the added benefit of mortgage interest tax deductions. Picture what this will do to the rental market in the five boroughs.
Already for several years now there has been a glut of unsold units in so-called luxury condominium buildings. Once telecommuting becomes the norm, units that are currently occupied will also be flooding the resale market.
As for retail spaces, these have been in a tailspin for years. Between landlord greed and the onslaught of online shopping options, city dwellers have long since gotten accustomed to living without the mom and pop stores that are so important for urban quality of life. But now even the Wells Fargos, CVSs and Duane Reades will be shuttering their stores because of the population evaporation.
And so with these thoughts in mind, I offer my notes on Parshat Behar.
Parshat Behar: The existential difference
between ‘Land’and ‘Real Estate’
I came across a mordantly and presciently cynical cartoon that appeared on the cover of a Hungarian humor magazine in the late 19th Century. The magazine was, of course, published and edited by Jews who were pretty much on the forefront of everything that was happening in fin de siècle Budapest
On the magazine cover we see the back of a very well-fed Jew clad in his Shabbat finery overlooking Andrassi Street (the new Champs Elysee of Budapest). Clearly he is a real estate developer and he is proudly declaring “How goodly are thy tents o Jacob” (מה טובו אהליך יעקב). The brilliant cartoonist could not possibly have grasped just how profound his sarcasm was. The Jewish real estate developer with his thousands of square meters of buildings actually believing that he has made it, that he is secure, that nothing is more sure than owning the most prime property.
Of course we all know what eventually happened. Andrassy Street is still the Champs Elysee of Budapest. As for the descendants of that developer and all the others who built ‘Judapest’ – either smoke over Auschwitz or evaporated through terminal assimilation.
One might think we have learned the lesson. But, no. To this day real estate remains he holy grail of so many of our moguls, especially Orthodox ones – skyscrapers in New York, huge projects in Germany, buying up every piece of property in London. It isn’t just greed. It’s the quest for a security that simply isn’t there.
The Jewish lust for property is in diametric contrast to the Torah’s adamant point of view regarding real estate. Then Torah is very clear; every Israelite is entitled to his modest piece of land in perpetuity (for the Levite it is his urban domicile). Beyond that, real estate can neither be bought nor sold. At the very most it can be leased for the duration of a 50 year Jubliee cycle. After that it must revert to its original owner.
…בשנת היובל הזאת תשבו איש אל אחוזתו
… כי מספר תבואות הוא מכר לך
“During this Jubilee year every man shall return to his landholding … for he only sold (leased) you the number of harvests”
(Leviticus 25: 13 and16)
Clearly the Torah has a loathing for the real estate industry. It understands the hubris property ownership causes, and the false sense of security is gives.
Some years ago I hailed a taxi in Washington DC. The driver was a pleasant Palestinian Arab psychologist who was waiting to get licensed in the US. We started chatting. After a few minutes he turned off the meter and pulled over while we continued a fascinating conversation that ultimately chilled me to the core. My cabby told me that Arabs like him greatly admire and envy Israel for its freedom and democratic values. “But in the end”, he said, “you will lose to us”. I asked him why he was so sure, and his response devastated me: “Because for you it is about real estate while for us it is about land.”
For once I was absolutely speechless, and had nothing to say in response.
Real estate is not a business. It is a drug with which more is never, ever, ever enough. And the worst part of this drug is that it lulls one into a false sense of security.
We do not live in an era when it is possible to have equal distribution of Israel’s limited land resources in perpetuity. But the teaching in Parshat Behar should not be ignored. We crave real estate at our own peril – and not merely at the peril of the developer/owner/landlord. Rather, they imperil all of us through their greed by turning our “land” into “real estate”. Bad enough in the Diaspora where it is merely supercilious ego and personal existential continuity that is at stake. But here, where we are meant to live, it is lethal.
Parshat Behukotai: When too much is not enough
Parshat Behukotai closes Leviticus with a litany of the terrors G-d will visit upon His people unless they obey His law. And the consequences are horrifying indeed.
As the climax builds with horror heaped upon horror, the list of punishments seems to pause for a moment with the interjection of verse 26:26 which, in the context of this catalog of afflictions, seems rather benign. To whit:
בשברי לכם מטה לחם ואפו עשר נשים לחמכם בתנור אחד והשיבו לחמכם במשקל ןאכלתם ולא תשבעו
When I break your supply of bread, ten women shall bake your bread in a single oven and shall dole out your bread again by weight, and you shall eat and not be satisfied. — Vayikra/Leviticus26:26
Of course the absence of sufficient ovens, and a resulting bread shortage are nothing to celebrate. Nevertheless, after panic, wasting disease, fever that consume the eyes and make the heart ache, being struck down before one’s enemies, making our heavens like iron and our earth like bronze, letting loose the wild beasts against us, bereaving us of our children, bringing a sword upon us, sending a pestilence among us, and delivering us in the hand of our enemy …(16:25) a bread shortage does seem a bit anticlimactic.
Which is why I would suggest a radical re-reading of verse 26 which would fit very well as a literal translation:
“As I provision you with the staff of bread, and ten women will bake your loaves in a single oven and your bread shall be returned in its (proper) measure, yet you shall eat and not be sated.”
What the Torah is telling us is that there will come a time when a single oven can produce tenfold, i.e. we will have ten times as much as we can possibly eat, and still we will have that empty feeling of want. We will never be satisfied.
This is indeed the worst affliction of all. Why? Because when we are attacked by beasts, or driven from our homes, or put to the sword, or beset by pestilence, or – Heaven forbid – bereft of our children, at least we are conscious of what the problem is. The affliction is objective, quantifiable, it has a name.
But when we have everything we could possibly want – indeed tenfold – and are still constantly hungry for more, perpetually dissatisfied, then we are really in deep trouble. Because we have no clue as to what ails us. We have no comprehension of why we feel so empty. And, indeed, rather than strive for less in order to achieve some balance and coherence, we just up the ante and strive to get even “more, more more”.
Such are the times in which we live. When the bakeries produce ten times as many breads as we need. When we have more toys and gadgets than we can possibly use. When there are three Lexuses in the driveway, and Passover is a food binge at a five star hotel (or at least it used to be) – and all we want is even more – then we are truly in BIG trouble. Because we can’t even put our finger on the problem. We actually think this is normal! And our children grow up with a bottomless sense of entitlement that allows no room for natural ambitions, genuine fulfillment, meaningful vocations.
Perhaps it is no coincidence that this verse is 26:26. Twenty-six is the gematria (numerical equivalent) of G-d’s name Y-H-W-H. This punishment bears the double seal of Divine authorship. And it is a brilliant punishment indeed, because we suffer from it without even understanding why we are suffering.