As hundreds of New York City’s commercial real estate players gathered in Hell’s Kitchen Thursday night for the Real Estate Board of New York’s annual gala, the usual optimism in the room was tinged with a sense of urgency.

“We have an incredible housing crisis in our city,” Fred Cerullo, president and CEO of Grand Central Partnership and this year's recipient of REBNY’s John E. Zuccotti Public Service Award, told Bisnow. “The real estate community on the housing side needs to be probably the closest partner with government to solve the problem government is facing.”

While New York’s housing supply and affordability crisis dominated conversations among honorees and attendees on the red carpet at REBNY’s 128th annual gala, there was no escaping the predictions of a brutal distress wave for office assets.

“I think ‘24 is going to be a very, very hard year. Harder than in ‘23,” Leslie Himmel, co-founder and managing partner of Himmel + Meringoff Properties, told Bisnow. “I'm thinking of Sam Zell, who passed away, and who said, ‘Stay alive to ‘95.’ And I'm thinking, is it stay alive to 2025, or is it stay in the mix to ‘26? It’s going to be awhile.”

Still, the industry’s characteristic rose-colored glasses remained in place, even in the face of office distress.

“There are pockets of New York that, whether it's due to a rise in interest rates or softening in the office market, there are going to be people who have distress,” said Michael Rudder, principal of Rudder Property Group and winner of REBNY’s Young Real Estate Professional of the Year Award. “But with that comes opportunity and a resetting of the market and a return of the market.”

JRT Realty Group Managing Director Ellen Israel, who was honored with the Louis Smadbeck Memorial Broker Recognition Award, said “there's always more distress to come,” but the industry is working its way through it.

“Lenders don't want these buildings back, so they're going to work with them, they're going to figure it out, they're going to convert to residential, you're going to have to put some more money in it,” she said. “And they will. Everybody will.”

But housing remains the most pressing issue for the commercial real estate sector, attendees said, emphasizing the existential threat that a lack of housing could pose to the city’s economic development.

The chief concern for many was the need for collaboration between politicians and the industry and the threat of economic decline for the city if its residents' need for more housing affordable for those at all income levels can't be met.

New York City Mayor Eric Adams took the stage and outlined the work that his administration has done to create new housing and connect New Yorkers with existing housing.

Earlier in the day, Adams announced that the city's Department of Housing Preservation and Development financed more than 14,000 construction starts last year, which he touted as a record, in addition to 4,000 units for formerly homeless New Yorkers and more than 1,500 units of supportive housing.

“We’ve done it. We’re doing it,” he said. “But we need you.”

But housing developers can only do so much, Fetner Properties President and CEO Hal Fetner said.

Fetner Properties is one of the developers working on projects that receive a tax break with the now-expired 421-a abatement. He said his firm is set to deliver 870 units across three buildings using the tax break, but he added that the housing crisis will likely continue for the foreseeable future.

“Housing does not work without some form of incentive,” he said. “You've got a mayor and a governor who are putting forth some really smart, good ideas, but once it gets up to Albany, it's falling on flat ears. That's frustrating.”

The economic damage from a lack of political will in Albany and by the City Council will kick in as prohibitive housing costs prevent young workers from chasing opportunities in the city, Cushman & Wakefield’s Bruce Mosler said.

“Millennials and Gen Zs are going to be the dominant part of the workforce, I think, by 2030 or so. Those folks need affordable housing,” he said. “The future of New York depends upon the ability to house the workforce.”

Gov. Kathy Hochul addressed the dire need for ambitious housing plans in her State of the State address last week, Himmel said. But it is unclear what it will take to get some of those proposals, like a 421-a replacement program, across the finish line in the State Assembly.

“She's got to push really hard,” Himmel said.

Later in the evening, when Hochul addressed the gala’s thousand-strong audience, she reiterated her commitment to the measures that she tried to get through Albany last year and those that she suggested last week.

“I'll tell you what, the bold ideas don't work one year, I'll try them again the next year. That's exactly what we're doing,” she said. “We will work with the legislature and persuade them that their own constituents desperately want more housing.”

But with little certainty of legislative support for housing agendas, New York City’s CRE community used the gala to assert the role it believes it can play in the city’s future.

“We need the real estate community to help really solve the city's problems so long as the government is open to that partnership,” Cerullo said. “Generally speaking, they are. But it's always a battle.”