New York City commercial REITs sell off after Mamdani wins mayoral primary

New York City real estate has taken a dive on Wednesday following the mayoral primary win of Zohran Mamdani. Shares of SL Green Realty (SLG) and Vornado Realty Trust (VNO), both large real estate investment trusts or REITs, have both lost more than 5% by the afternoon.

While NYC's ranked-choice voting system will take until July 1 to be tabulated, Mamdani's main competitor in the Democratic Party primary, former New York State Governor Andrew Cuomo, has already conceded. Mamdani received 43.5% of the initial tabulation by the Associated Press, while Cuomo got 36.4%. And with NYC's heavily Democratic tilt, the winner of the Democratic primary usually wins the election in the autumn.

What Mamdani means for SL Green and Vornado

Mamdani's socialist leanings are concerning to the city's real estate industry, which largely backed Cuomo. Mamdani has pledged to freeze the cost of rent-stabilized apartments in NYC, as well as construct 200,000 more rent-stabilized dwellings over the next ten years. In addition, Mamdani has pledged to raise taxes on the wealthy to offer lower-cost, government-run grocery stores, as well as free childcare.

"I think [the CEOs] are not terribly happy with the direction [the race] is going. Terror is the feeling," said Kathryn Wylde, President of the Partnership for New York City, a nonprofit representing top CEOs of NYC firms, on CNBC's Squawk Box show. "Mamdani presents an ideological argument that the solution to every problem is to spend more taxpayer money."

While SL Green and Vornado both cater to commercial property, not residential, the market has decided that rising taxes and the probable mayor's economic policies might carry over to a worsening property market if some tenants leave the city. However, most of these firms operate from an already high-tax NYC due to the availability of labor talent and to be close to Wall Street, so there is no certainty that any tenants will leave.

Mamdani has also said that he will reduce regulatory red tape for affordable housing units but not for other development projects.

The five-day chart below shows that both SLG and VNO stocks began dropping last week before really moving lower this week. The market had a premonition since betting markets like Polymarket began strongly favoring Mamdani late last week. In the past five sessions, SLG and VNO have lost about 9% and 10%, respectively.

SLG & VNO five-day stock performance