How NYC's decade of rezoning changed the City of Industry

Michael Smart was working in his shop last spring when he found out that he had to move his business yet again. The owner of the building where the 45-year-old wood and metal worker had his business, on Dobbin Street in one of Greenpoint's last industrial areas, walked in unexpectedly and told Smart that he would not be able to re-sign the lease when it expired at the end of 2013.

It wasn't that Smart had been a bad tenant; he'd paid rent when he was supposed to, and had rolled with increases that he says had brought his monthly payment from $11 to around $15 per square foot since he had moved in 10 years ago. But this time the rent increase would be steep. Very steep. "He said he was going to raise it and knew we couldn't compete," says Smart, who split the approximately 5,600-square-foot-space with another fabrication company. "Like, you're not even in the ballpark of what I want." Smart says his landlord told him he was hoping to get $35-$40 per square foot for the place, bringing the rent from around $7,400 to more than $16,000 a month.

Smart had lived in Brooklyn since 1992, and though he was familiar with the rapid rate of change in New York City, he was caught off guard by the speed with which it came this time around. More than a decade ago, he had been evicted, along with a handful of other artists, from his first studio, a $4-a-square-foot live-work set-up in an old guitar factory on Broadway in Williamsburg, after a year-long fight that turned bitter when the landlord cut off electricity to the building, he says. Smart was one of the last holdouts. The Gretsch building, named for the instrument company that constructed it, was legally converted to allow for residential units in 1998, becoming one of the area's first high-profile condo developments. A few years later, the rapper Busta Rhymes scooped up three units.

But this time, Smart's Dobbin Street workshop was no illegal live-work conversion; —he resided with his wife and children elsewhere in Williamsburg. It was home to his business Urban Aesthetics, which had three employees and specialized in the restoration of 18th- and 19th-century furniture, sculpture, and lighting. And though Greenpoint was changing around him, Smart was situated inside an Industrial Business Zone—a designation created by Mayor Michael Bloomberg's administration in 2005 specifically to protect industrial companies that didn't own their properties from the real estate pressures causing such rent hikes.

But the massive redevelopment of the Williamsburg and Greenpoint waterfronts and the sudden desirability of the area was having a trickle-down effect on even the IBZ, a small wedge in the middle of the vast rezoning that had transformed the two formerly industrial neighborhoods. A night market and concert venue had replaced the bakery across the street, with the leasing agents pitching the "central location and existing, vibrant night life scene." A restaurant with a $125-dollar tasting menu had opened inside the IBZ a few blocks away. And the Wythe Hotel opened in Spring 2012 on the edge of the zone, quickly becoming a "summertime Eden" for a fresh crowd of jetsetters——a beneficiary of the nearly 200 blocks of rezoning the city pushed through in 2005, turning Williamsburg into a development free-for-all, as gleaming condo towers rose along a waterfront once blanketed by factories.

The Williamsburg and Greenpoint rezoning was just one of the nearly 40 percent of the city's acreage— initiated by the Bloomberg administration, part of an impressive track-record of development that Bloomberg highlighted as a central component of his legacy. In his final State of the City address in February 2013, Bloomberg specifically touted the conversion of industrial areas in the city under his watch, of which Williamsburg-Greenpoint was the largest. "From Long Island City and Hunters Point South," the mayor said, "to Greenpoint and Williamsburg and DUMBO, we have rezoned old industrial areas and brought them back to life."

But this legacy has not come without costs; between 2001 and 2011, the number of manufacturing jobs in the city halved. The loss was demonstrable in rezoned areas like Williamsburg: industrial employment in the 11211 zip code dropped from around 7,500 in 2000 to 3,600 in 2009.

Factors both global and domestic have contributed to the broad decline of manufacturing in the United States, but the loss of these jobs has been significantly more acute in New York City than other parts of the country. While the nation on the whole has shed about 30 percent of its manufacturing workforce since 2000, New York City lost 58 percent of its manufacturing jobs over the same time period. Over 12 years in office, Bloomberg brought eye-opening economic growth to many areas of the city. At the same time, the city's rising levels of inequality have begun drawing comparisons to the Gilded Age. How will Bloomberg's legacy of development be remembered in a city with a deep working class identity at its core?

New York City came of age as the country's premier powerhouse in the era following the Industrial Revolution, and Brooklyn was a huge part of that: it was once the fifth most productive area in the country, with booming factories spread along the waterfront from Greenpoint to South Brooklyn.

Industry also provided stable employment for the legions of foreign-born workers that have perennially flocked to New York. But by the time Smart moved to Dobbin Street around the start of Bloomberg's first term, the city had been shedding these jobs for decades. When Bloomberg was first elected in 2001, less than a third of the 1.8 million jobs in the industrial sector from the mid-1950s remained.

In the 1960s and 70s, city lawmakers had hoped that zoning laws that restricted uses in industrial areas would reduce competition for space, keeping rents low and thus functioning as a de facto industrial retention policy. But many businesses continued to flee. By the Rudy Giuliani era, the city's attitude had changed. A free market ethos had spread over the country at large, and the bent towards deregulation was trickling down to the municipal level.

"The fundamental insight was that the city had vastly more land area zoned exclusively for industrial use then necessary, and that manufacturing activity had for quite some time been declining in New York City," says Joseph B. Rose, the chairman of the city's Planning Commission under Mayor Giuliani, who also served under Bloomberg. "It was the affirmative view of the Giuliani administration that the market should have a bigger impact in deciding what greater uses should be allowed."

Encouraged by the stories of artists reclaiming industrial buildings in neighborhoods like Williamsburg, as well as the earlier transformation of former industrial areas like SoHo and Tribeca, the city began to rezone the industrial areas it saw as fallow, such as Long Island City and the Williamsburg Bridge area, to allow commercial and residential developers—the free market—to remake them.

The city's planning philosophy was likely affected by other pressures, as well. Real estate interests tend to be among the biggest donors to city and state political campaigns, and observers say that has influenced the city's planning process.

"There's been a long tradition in New York of the development community really having a large say about who gets appointed to city planning, who get appointed to large offices, and having a lot of to do with the big development projects," says Ron Shiffman, an urban planning professor at the Pratt Institute and who served on the city's Planning Commission from 1990 to 1996.

"A number of lobbyists that represent large scale development were at every meeting, influencing a lot of their decisions," says Shiffman, of his time there. Shiffman is also the co-founder Pratt Center for Community Development, which studies industry in the city, among other development issues.

With Bloomberg in City Hall, the Department of City Planning kicked the process of rezoning begun by Giuliani into overdrive. In the mayor's first term in office, the Department of City Planning took former manufacturing districts like Hunters Point in Queens, parts of the South Bronx, and large swaths of Greenpoint and Williamsburg and rezoned them to permit for residential development. By 2008, the city had lost nearly 15 percent of its industrial acreage to zoning changes, according to statistics provided by the Pratt Center. More than a quarter of the 95 rezonings between 2003 and 2008 converted manufacturing districts into other types of uses. These actions, combined with the disdainful attitude Bloomberg had expressed towards industry, seemed to reveal that the new mayor did not value the industrial character of the city.

"If you are a pharmaceutical company or a steel company, you do not need to be here," the mayor said in a 2003 interview with the Financial Times. "New York City should not waste its time with manufacturing."

Earlier that year, the New York Times had published excerpts from a draft of a private speech he gave at an economic conference, calling the city a "high-end product, maybe even a luxury product."

"New York offers tremendous value, but only for those companies able to capitalize on it," the speech read.

But something began to shift in the administration's consciousness. By 2005, a city-funded study found that its policies did more than simply rehabilitate industrial ghost towns: the redevelopment of manufacturing areas was putting the city at risk of "losing viable industrial employers."

The survey noted that businesses were concerned about finding the spaces they needed to operate. About 50 percent of the roughly 500 businesses surveyed confirmed they planned to grow, but less than half of those said they would look to expand at their current location. More than a quarter of all the businesses were considering relocation "immediately," most outside of the city.

Furthermore, the study reported that some landlords in industrial areas were reluctant to offer long-term leases to their tenants due to speculation—the practice of keeping real estate vacant, or offering it only on a short term basis, in the hopes that a residential rezoning or conversion in the future would send property values through the roof. (Industrial properties garner the lowest real estate prices of the city's three distinct land uses—commercial uses can fetch up to twice the amount of industrial rents per square foot, residential as high as four times the amount in the same area—making industry vulnerable to real estate pressure in unrestricted areas. Part of this discrepancy stems from the fact that manufacturing, which often needs a lot of room, is less profitable per square foot.)

For industrial businesses, many of which rely on heavy, expensive machinery that is difficult to install, let alone move, the prospect of having to relocate frequently is enough to quell investment.

Manufacturing jobs are not necessarily replaceable with those in other industries, either. They provide better opportunities to learn skills and for advancement than many other entry-level jobs, according to advocates, particularly for those who may not have college degrees or speak English fluently. And they pay significantly better: the average annual wage for a manufacturing worker in New York City is around $52,000, compared to $36,500 for retail work and $25,000 for employment in food service, according the New York State Department of Labor.

In the wake of its research from 2005, the city appeared to change its course; it established the Industrial Business Zones soon thereafter, setting aside 16 safe havens for industry that it said would be free from the threats that were driving businesses away. The city also guaranteed that IBZs would not be rezoned for residential uses and promised to do more to prevent illegal residential conversions.

Bloomberg also announced the creation of an office to support the industrial sector, proudly trumpeted as The Mayor's Office of Industrial and Manufacturing Businesses (OIMB), which would help manage the IBZs, assist businesses with the slew of incentives and tax credits that exist for them in the city, and coordinate and advocate for industry between various city agencies.

Both programs also had the potential to soften the blow of rezonings, and, a cynic might observe, to smooth the way for more. Many of the IBZs were located around the areas that had been rezoned, like Long Island City in Queens, Port Morris in the Bronx, and Williamsburg and Greenpoint in Brooklyn, then in the final stages of their lengthy and contentious rezoning. The administration also created a tax-credit for the one-time relocation of businesses—many coming from rezoned areas—to the IBZs.

"Certainly one of the positions of the administration was, 'Don't worry, businesses, you know you have this office that we created to hear your concerns through this rezoning process,'" says Carl Hum, the OIMB's first director, about the Williamsburg rezoning.

Still, industrial proponents saw the program as a big step forward in the city's consciousness. Hum presided over a staff of six at its peak, and the office seemed to hold a vaunted place in the city's bureaucracy, reporting directly to a deputy mayor.

"It was definitely hailed as a real significant progression of the administration's thinking with regards to the myth of economic development we have around the city," says Hum. "There aren't many times you have the mayor doing an about face," he added, pointing to Bloomberg's comments in the Financial Times. "That was pretty striking."

Sometime in the last 20 years, a new trend began taking shape in the world of production. Suddenly it seemed like everybody wanted their pickles brined in small batches, their beer made by a craft brewer, their bicycles assembled down the block. Though the phenomenon of artisanal goods has become a Brooklyn cliché, such production has also continued to grow. Spurred on by small producers, the city's manufacturing sector saw its first full year of growth in more than a decade in 2012. And observers say these statistics, drawn from federal classifications based off old manufacturing models, leave out entire categories of new industry—particularly those in arts and entertainment-related production—and fail to fully capture the reality of growth.

One of the great triumphs of the Bloomberg administration has been stimulating this type of manufacturing in some of the properties it owns, such as the Brooklyn Navy Yard. Under Bloomberg's direction, the city invested $200 million for infrastructure improvements to the former naval site—roads, water and sewer and electrical systems—after the nonprofit that manages the property made the case that the funding would support new manufacturing industries: companies making frames for museums, set designers spurred by the new growth in local film production, and other high-end designers.

"The city deserves enormous credit," said Andrew Kimball, who was appointed president of the Brooklyn Navy Yard Development Corporation at the end of 2005. "There was tremendous excitement about it, illustrated by the number of times the mayor came out to announce various projects we were undertaking."

Around 330 companies now employ more than 6,000 people at the Navy Yard—a far cry from the 70,000-plus workers who crammed the area during World War II, but nearly double the number of workers employed there towards the end of the 1990s. Kimball says he expects that number to double again in five years. According to a study done by the Pratt Center, the Brooklyn Navy Yard generates economic activity that creates $2 billion in additional earnings and another 15,000 jobs elsewhere. It now has a list of more than 100 companies waiting for space at the campus.

The city also owns similar spaces, managed by the New York Economic Development Corporation, in the 97-acre Brooklyn Army Terminal, in Sunset Park, which houses more than 3,400 workers and 100 companies as well as 2 million square feet of industrial space in properties in Sunset Park for another 100 companies and 2,000 employees.

And there is much excitement about Kimball's latest project, the renovation of Industry City, a collection of 16 buildings on the Sunset Park waterfront run by a partnership of private companies, where the Brooklyn Nets plan to move its headquarters, and craft food companies like Colson Patisserie have already signed on for some of the complex's more than 6 million square feet of space.

[Industry City. Photo by Nathan Kensinger.]

Despite the recent success of small producers, critics say New York City is still as challenging a home for industry as it was in 2005. Rezonings and conversions continue to chip away available industrial stock, advocates say, and existing buildings still need to be repurposed into smaller spaces—between 2,000 and 10,000 square feet—for the manufacturers of today.

By 2007, Hum had left the OIMB to lead the Brooklyn Chamber of Commerce, and the city slowly began downsizing its operations, folding its staff into other departments, before eventually dissolving the entire office and shifting its responsibilities to other agencies. Its activities have now been outsourced to a desk at the Economic Development Corporation.

Funding for the organizations that support manufacturing around the city has declined, as well. The East Williamsburg Valley Industrial Development Company (EWVIDCO), for example, which manages two IBZs in North Brooklyn, including the one that Smart rented in, has seen its budget from the city cut in half in just a few years; funding has dropped from $320,000 in 2010 to just under $160,000 last year, according Leah Archibald, the executive director of the organization. Many industrial advocates once again feel that the former mayor—as well as the DCP under Bloomberg-appointed director Amanda Burden—never really took the industries they represented seriously.

"The DCP certainly has its view about where the city and development were headed," says Carl Hum. "I think in their view, they were fully convinced that manufacturing doesn't have a place in New York, and that better uses out there were for residential or commercial use."

Vacancies in industrial areas are low—as low as 4 percent citywide, according to some accounts—so competition for space is tight. Rents for industrial properties in the outer boroughs have climbed more than 25 percent last year in just over two years, according to Crain's.

"This is the tightest market in memory for experienced industrial brokers," says Chris Havens, a director at Aptsandlofts.com, of the industrial real estate market in Brooklyn. "You're getting an amazing amount of calls and no product."

Recently, Stephen Levin, the city councilman who represents much of Williamsburg and Greenpoint, did a survey of 40 local food producers; more than three-quarters of the businesses looking for places to expand said they were unable to find the space they needed.

And not all of these businesses are three-person startups, either. Acme Smoked Fish has been in Brooklyn since 1906 and at its current address on Gem Street—just a few blocks west of Smart's old location—since the 1950s. Looking to expand, the company recently spent more than a year searching properties in Brooklyn and Queens (as well as upstate), to no avail. Though it still smokes about 100,000 pounds of fish a week in Greenpoint, Acme is now in the process of opening a $25 million facility in North Carolina, where it will move some of its smoking operations. It has started planning for a future where its Brooklyn location is used mostly for distribution.

"[The city] is great for small incubators," says Gabriel Viteri, an executive at the company. "But if you go beyond that threshold when you become a larger company, it's pretty challenging to stay here."

Some businesses have simply left. After hearing that his Greenpoint truck lot would be taken by the state under eminent domain, Bob Haley says he looked at around 100 properties in a two-year quest to house his 26-person company, Haley Trucking. The business, which his grandfather started in 1919 (when trucks were horse-drawn carts) moved from Manhattan to Long Island City in the 1980s and eventually to Greenpoint in 1996, but this time around, Haley simply couldn't find the space he needed.

"There were no trucking terminals to move into. They didn't exist anymore," he says. "There used to be hundreds of them."

Haley eventually decided to move his operation to New Jersey in 2012, where he estimates he's lost about half of his business.

Smart eventually signed a lease at one of the properties owned by the Greenpoint Manufacturing and Design Center, a nonprofit industrial developer that runs four complexes in Brooklyn. CEO Brian Coleman describes the organization as a "port in a storm," and says many tenants come from situations similar to Smart's, or worse. Two recent arrivals came to the GMDC after a previous landlord cut a hole in the roof of an old building on Berry Street, flooding it in attempts to get the remaining companies to leave.

"We've had people come to us on a Friday afternoon and told us that, 'My landlord wants me out on Monday,'" Coleman says. "For most of our displaced tenants, five years ago it may have been from the west side of Manhattan, now it's from some place in Brooklyn."

Coleman too has struggled the find spaces for his organization to expand. He recounts a story about a property around the corner from a current GMDC-run space in Williamsburg. The GMDC space had been appraised at around $100 a square foot, and Coleman says he made a similar offer for the nearby building, which worked out to be around $3 million. The seller came back asking for $18 million.

"I thought she said $1.8 million," says Coleman.

The seller told him that they thought the property could fetch the higher price because it could be developed into a hotel. (One criticism with current zoning is that it allows for buildings like hotels, night clubs, and storage facilities in many IBZs and other areas, like Dobbin Street, zoned for light manufacturing.)

"[The city] is great for small incubators. But if you go beyond that threshold when you become a larger company, it's pretty challenging to stay here."—Gabriel Viteri, Acme Smoked Fish

And many say the IBZs have not fulfilled even the most basic purposes they were created for. Smart says just down the block from his old workshop, the second floor of a factory building has been converted into illegal lofts.

Those that are lucky enough to own the building they work in are sometimes better able withstand the changes in developing neighborhoods around them, but the pressure can be great to pack up shop.

"I get contacted by real estate developers on a weekly basis," says Tod Greenfield, who helps run a suit manufacturing business, Martin Greenfield Clothiers, at the same Bushwick location his father started working at in 1947, long before hipster hotspot Roberta's opened around the corner.

Immigrants continue to flood to the city from all over the world—a recent city study noted that New York City's foreign born population had reached a record high: 3.1 million people, or 37 percent of the city. But advocates wonder where these individuals will find employment.

"Not all of these individuals are creating Googles or startups," says Carl Hum, whose own parents, immigrants from China, worked in the garment industry; his father pressed shirts in Greenpoint, and his mother worked as a seamstress in Chinatown. "You need to have a place for individuals to work and provide for a family, otherwise you're going to have a very divided and stagnant economy."

Proponents of the type of free market development that Bloomberg will be remembered for say the influx of residential investment in areas like Williamsburg has done wonders for the city.

"Long before these areas were hot, when no one wanted to live in these areas, industries were already in massive decline there," says Tokumbo Shobowale, who worked in the mayor's office as chief of staff for economic development and then chief business operations manager between 2010 and 2013. "I think it's just a reality that industry that relies on dirt cheap land is not going to work here."

Shobowale thinks that as part of the transition to a new mayor, and perhaps, fatigue with a leader who'd been in office for more than decade, Bloomberg has been receiving undue negative characterizations. "With time, people will realize there was a pretty big renaissance in industry in New York City under his tenure," Shobowale says. "Look at Brooklyn, as a foodies mecca. Now you have this whole maker community, MakerBot being the most prominent, but there are a bunch of these smaller or more craft-like things that didn't exist a decade ago."

Still, critics like Shiffman say the former mayor fell short of expectations in the real estate world. "When we saw Bloomberg coming into office, many of us felt that here was somebody who was wealthy enough to be independent of those development forces," he says. "We were disappointed once we realized that his decisions and actions seemed to favor the interests of the large developers over those of the community."

New Mayor Bill de Blasio, whose upstart victory was fueled by a relentless emphasis on the city's increasing income gap, appears to recognize the connection between manufacturing and the vibrant middle class he has so often invoked. He dedicated a section of his campaign platform to industrial development, noting the large number of industrial rezonings under his predecessor and cheering the Greenpoint Manufacturing and Design Center and the Brooklyn Navy Yard as positive developments. De Blasio's plan also broke with Bloomberg's in a key way: it called for restrictions to be tightened in industrial business zones, arguing that uses like storage facilities, gas stations, "superstore" retail, and hotels be prohibited in these areas, and advocated for zoning changes that would codify the live-work spaces that augment modern industrial uses.

"He said all the right things during the campaign, and continues to say them now," says Leah Archibald. "I think focusing on working class jobs aligns well with his 'tale of two cities' theme."

"Not all of these individuals are creating Googles or startups. You need to have a place for individuals to work and provide for a family, otherwise you're going to have a very divided and stagnant economy."—Carl Hum

But ultimately it will be up to the city's residents to put the pressure on its leaders that will determine whether New York City will continue on its current path.

"This is another mirror held up to society. And it's another way to look at the hollowing of the middle class," says Archibald. "Do we want to live in Dubai, or do we want to live in a city of economic and cultural diversity?"

Smart's old warehouse will be the new home of a jeans boutique, The Brooklyn Denim Co. (Though brokers had originally asked for more, they eventually closed at around $32 a square foot.) In a release, Kalmon Dolgin, the agency that brokered the deal, made no reference to the Industrial Business Zone, instead calling the area the "Wythe Avenue nightlife hub."

It can be easy at a glance to see New York City's endless cycles of growth and rebirth as an organic process, but Smart says he now understands that nothing in the city is as random or spontaneous as it seems. Neighborhood-wide change is largely sketched out, years in advance, by the city's decision makers.

A memory from a ways back sticks in Smart's mind. He remembers seeing the city dig up Kent Avenue for major infrastructure improvements, years before the area's rezoning passed through the City Council. Smart didn't understand why the street, then a derelict strip of waste transfer stations that he says included a whorehouse, was receiving the city's attention at the time.

"We didn't really make the connections with the struggles we were going through at the time, but now it's clear, like, oh, this was already done—they'd already made the deals and this was all going to be rezoned," he says. "We were fighting a futile battle. Everybody knew it was coming. Except for the people who were living in the neighborhood."
—Eli Rosenberg
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