Archive for the ‘New York City’ Category
What’s going on with Manhattan residential real estate?
The article above says that prices in Manhattan are going up? What happened to the narrative that people are LEAVING Manhattan because they can work from home?
Well I don’t know for sure, but I have some theories.
Theory #1: Prices for real estate are going up everywhere and not just in Manhattan. There’s just a massive wave of asset inflation happening because of super-loose monetary policy from the Fed and massive inflationary government spending.
Theory #2: There are people who can now work from home, yet they don’t want to move out of Manhattan. Instead, they want to move into a larger co-op/condo/apartment in Manhattan. This pressure for more space is causing an increase in the price per square foot for all sizes of residential until.
Theory #3: Yes, NYC is in a death spiral, but hardly anyone has fully grokked it yet. Right now could very well be the peak of Manhattan residential real estate prices, and it will only go down from this point forward.
Grandmaster plays chess hustler in Washington Square Park
The highlight of the game is when the chess hustler, losing to the grandmaster, attempts to cheat by using sleight of hand to remove his opponent’s knight from the board, but grandmaster Maurice Ashley doesn’t let him get away with it.
Maurice Ashely’s family moved from Jamaica (the island nation) to a ghetto neighborhood in Brooklyn (Brownsville) when he was 12, and he went to Brooklyn Tech high school (which requires an admissions test to get into, but you needed a much lower score than you needed to get into Stuyvesant).
At Stuyvesant, several of the black kids were avid chess players. I had no hope playing against them.
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Why aren’t there more black grandmasters? My theory is that, with affirmative action, a black with the mental discipline needed to play chess can get a much more profitable career doing something else.
The coming collapse of New York City
It has been a month since I last wrote a post about this topic. Since then, I have become even more pessimistic about the future.
To remind you of the basic thesis, although they say that New York City has many industries like finance and banking, business services, media and publishing, etc., in fact this can be generalized to say that New York City has only one industry: people working in office buildings. If that industry leaves New York City because everyone who used to work in office buildings is working from home, then I can’t see any other future for New York City besides a total collapse, maybe even worse than the collapse of Detroit because, as the proverb goes, the bigger they are the harder they fall.
New York City is a special case, because it has more density and is more dependent on public transportation than any other city in the United States, plus it’s also the most expensive city in the United States. The pandemic won’t cause mass migration out of Phoenix, Arizona (the 10th most-populated metropolitan area in the U.S.) which is more like a really big suburb than a city in the way that New York is a city. People have to live somewhere, so there’s no particular reason for people to move out of the Phoenix area even if they are working from home instead of working in the office.
New York City is like a Ponzi scheme that requires a constant influx of corporate jobs and gentrifiers and construction projects in order to balance its budget despite having the highest tax collection per capita of anywhere else in the United States. As businesses and rich people move out, budget cuts and reduction in services will make New York City an even a crappier place to live and more will move out. Garbage is already piling up, the presence and aggressiveness of homeless are increasing, shooting incidents have doubled since a year ago.
The big question is, when will people return to the office? Will they ever? The last report on this from the New York Times indicates that less than 10% of workers have returned to the office, primarily in real-estate and banks, two industries that are especially worried about a collapse in commercial real estate (with banks having lent lots of money to big construction projects) and are trying to set a “good example” for other industries. (With a “good example” actually being a bad example for public health.)
The reason I have become more pessimistic is because it now seems to me that the pandemic is not going to have a magical neat ending. I think people are imagining that everyone is given a vaccine and Covid-19 disappears never to return again. This is unlikely to be the case. Most worrying, to me, is that during the previous two weeks there has been a rise in cases in the Hasidic neighborhoods. The Hasidim have not been social distancing for months, so why are they suddenly getting sick again now? My answer is that immunity to Covid-19 begins to fade after five to six months.
My other thought is that there will probably be an outbreak of Covid-19 AFTER we start vaccinating people. I think it’s pretty predictable that, after receiving the vaccine, people will think they can go back to normal, take off their masks, go to crowded indoor places. But if the vaccine is only 75% effective, and only 75% of the people have been vaccinated, that’s a recipe for an outbreak. There are flu outbreaks every year despite vaccines and people having had the flu before.
I think that in order for the virus to go away, we need to force EVERYONE to get vaccinated, and I don’t think we have the political will to do that, just as we don’t have the political will to make everyone wear masks in places where they should be wearing them. Robert Redfield pissed off the virus-denier-in-chief when he said that masks may be more effective at stopping spread of the virus than a vaccine. But it’s probably true.
I don’t foresee the other 90% of New York City office workers going back to the office until Covid-19 is gone. Until then, people don’t want to take crowded trains and subways, ride crowded elevators, so they can stay cooped up indoors for 8+ hours where one infected person could infect dozens of their coworkers. Corporations don’t seem to be willing to make people do that given that remote work has been working well enough, and will probably get better as people learn how to adapt it.
If Covid-19 is not gone, even after a vaccine is widely available, I don’t see New York City ever recovering. Even if Covid-19 completely disappears next summer, New York City may not be able to survive because the work-from-home model has been proven to be successful and if 20% of office workers continue to work from home, that might be enough to continue the death spiral that leads to the collapse of New York City. But given my prediction that Covid-19 will NOT completely disappear within another year or two, the collapse of New York City is inevitable.
Yes, New York City (and others like it) is really doomed
I previously wrote about the coming death spiral.
Why did Detroit decline from being one of the country’s major cities to being a crime-ridden dump? Because its main industry that it total relied upon, automobile manufacturing, left. The same thing happened, though not quite as dramatically, across the region known now as the “Rust Belt.” Manufacturing left, the factories were left empty, the cities died.
What is New York City’s main industry? Some people will insist that New York City has many industries like Finance, business services, media, etc. But that’s the wrong way to look at it. New York City is actually totally dependent on a single industry: people working in office buildings. If that industry moves away, in this case to people’s homes, then New York City no longer has much of an economic purpose.
But what about all the great “culture,” the New York apologists keep saying. People will stay for the “culture!” Well Detroit once had a lot of culture. Maybe not as much as New York City, but for a city in the Midwest there was a lot of culture there. The culture left when the consumers of culture left. I hear that some big-name (and surely overpriced) restaurants and art galleries have already moved to the Hamptons. In fact, I would bet on the Hamptons as being the place that supplants Manhattan as the playground for the richest of the rich after New York City collapses. Eventually, even big museums can move out. If MOMO and the Whitney could both move to new buildings in Manhattan, then they can move to a new buildings outside of Manhattan.
New York City won’t survive as a tourist city, like Rome. Tourists won’t go there when New York City becomes crime-ridden like Detroit. New York may be the oldest and most important city in the New World, but it ain’t Rome. Rome was never full of NAMs. (In case you don’t understand the comparison, once upon a time, Rome was the most important commercial city in the world. But today, it’s not even the most important metropolitan area in Italy, that’s Milan. And Italy itself has become a minor country. Rome survives mostly as a tourist attraction.)
Will people return to Midtown?
According to this NY Times article, at one office building on 6th Avenue (in Manhattan, of course), only 6% of people are working in the building compared to the previous summer, so 94% are working from home.
That’s pretty much as I would have expected it to be. If anything, it’s a mystery as to why 6% of the building (500 people) are going into the office. The company I work for has announced that all offices are closed—you can’t go to work in them even if you wanted to—until 2021. And I have no reason to actually believe that they will make people go in in January 2021 if the pandemic isn’t over yet. The longer we all work from home, the more time there is for this to become the norm, and inertia will keep people at home.
This has nothing to do with Donald Trump or Andrew Cuomo, this is all about big corporations keeping their employees home regardless of whether Trump says everything should open or if Cuomo theoretically allows offices to re-open with social distancing. Big corporations don’t want to put their employees at risk or expose themselves to liability, not when everything is working out well enough with everyone working from home.
The big-money question is, what happens if there’s a vaccine and a successful vaccination program such that it’s safe for everyone to return to the office. Will everything go back to the way it was before? I don’t think so. With all the cool restaurants and stuff closed, what made going to work in Midtown fun (if you didn’t have to put up with a long commute) is no longer there. I bet a lot of top-level management has moved to the Hamptons and they may not want to go back themselves, having gotten used to a more rural lifestyle.
The article says, “New York survived the late ’70s, and everybody thought the city was over, rampant crime, near bankruptcy. It survives the market crashes of ’87 and ’89, it survives the dot-com crash of 2000 or so. It survived 2008. So it will survive.”
I say that this time it’s different because, in none of those other economic downturns was the whole reason for NYC’s existence, people working in crowded office buildings, put into question. In those cases, some people were out of work, but the technologies to allow 96% or more of the white-collar workforce to work from home didn’t exist. Maybe it existed somewhat in 2008, but 2008 was just an normal recession and didn’t call into question the very reason for NYC being NYC in the first place.
The coming death spiral of New York City
The “death spiral” is an ill-defined term, but it’s generally applied to situations where, when things get worse, this causes things to get even more worse than before.
The NY Times recently published an article about a coming public transit death spiral. In other words, loss of revenue from lower ridership means that, in order to balance their budget (absent a massive infusion of outside monetary support), they need to cut service, increase fares, reduce capital improvement, all things which make the transit system even worse thus causing even lower ridership with corresponding lower revenue.
New York City as a whole is in the same unavoidable death spiral. Rich people are fleeing to the Hamptons, and businesses are abandoning their expensive Manhattan office buildings and telling everyone to work from home. This resulting loss of tax revenue means that NYC will have to slash spending and/or raise taxes (if it’s even possible to raise taxes any higher given that NYC already has the highest taxes of anywhere in the United States), making the city even less desirable than it was before, which would encourage even more people and businesses to move out.
In addition to normal downward-spiral economics, we have two other factor working against New York City:
(1) Memory of the pandemic. Those who remember it won’t want to go back to living in apartment buildings where you have to ride the elevator with people who could be contagious with something. Now yes, it’s a proven fact that many people, probably most people, especially young people, will just forget about the pandemic as soon as they can, even when the pandemic isn’t over yet. But the people who will permanently change their living preferences because of it are likely to be older and wealthier, the people who pay a disproportionate share of NYC taxes.
(2) Rising crime because of liberal policing. Now unlike the factors above which I am certain about, this is more speculative. When De Blasio took over years ago I predicted rising crime, which never happened. At least it never happened until this summer. There has been a big increase in shootings since the beginning of June. So although we should cautious about saying “this time it’s different,” the post-BLM-protests political environment truly feels different to me, and I think we could be entering an era of soft-on-crime policing that will lead to an explosion of crime that will make New York City that much less desirable.
What about the people who say something like “New York City is the most desirable place to live because all of the culture is here.” Well culture can move pretty easily. According to the Hamptons article above, expensive restaurants, stores, and art galleries that used to be in Manhattan are moving to the Hamptons. It’s pretty clear to me that the Hamptons will replace New York City as the most desirable place to live because of all the culture. Certain big institutions like the Metropolitan Museum of Art won’t be able to move to the Hamptons, but that’s mostly a tourist attraction and not something that the average rich New Yorker goes to on a regular basis.
Work-from-home means the end of cities?
The ability to work from home as easily as we work from the office is a pretty new phenomenon. The technology that makes it so easy just wasn’t there in the 1990s, and only somewhat there in the naughts.
The development of work-from-home technology didn’t lead to an immediate exodus from the office. Not at all. No major company wanted to be the first. People always had to go to the office to work, and big companies don’t like radical change.
But according to an article in today’s NY Times, not only are companies finding that workers are just as productive at home, in many cases companies have found that the workers are MORE productive at home!
So now that companies have been forced to go WFH and they’ve discovered that it works just as well as working from the office, maybe even BETTER, plus they can SAVE MONEY by not having to pay for expensive office space in big cities, why not make it permanent?
When the factories left Detroit, Detroit went into a death spiral. Office buildings are the factories of major cities today, and if those factories move from the office building into peoples homes, then why won’t cities like New York or San Francisco also go into death spirals?
On top of that, there are two other important trends that spell doom for cities;
(1) There’s the virus itself. There’s the perception that dense cities aren’t safe. (And certainly, crowded rush hour subways are not safe during a pandemic, so the perception isn’t false.) I have no doubt that after a few years go by, this perception will fade away, but by the time it fades away it will have already done its damage to cities.
(2) The BLM protests will lead to soft-on-crime policies that will cause crime to come roaring back. I remember the 80s when people had the perception that cities were dangerous places because of crime, that perception will return. The riots and the subsequent boarded-up windows have already given Manhattan a very dystopian feel to it.
Thus we have the perfect storm of factors that will spell doom for cities. Once things start spiraling downwards, it’s very hard to reverse course. Detroit couldn’t do anything to save itself. Neither will New York City be able to save itself.
Sucks to be Amy Cooper
The genuine hysterical fear of the woman in the video is obvious to me, but there are thousands of comments at the NY Times article, and just about every single one of them is against the woman. They say the hysteria is just a cold calculated act in order to get the police to arrest the innocent black guy.
But as reported by a newspaper in the U.K., the woman has a proven track record of being a liberal. She donated money to Barrack Obama, Pete Buttigieg, and John Kerry. So it’s very unlikely that this was an intentional act of hatred against black people. Had this happened to someone else, she may very well have been part of the mob condemning that other person.
Unfortunately for her, because her genuine hysterical fear of a black man (whom she politically correctly calls an “African American”) was caught on video, she has lost her job and may never be able to get another one because the crowd on media, both social as well as traditional, have “canceled” her.
So if you need yet another reason not to live in New York City, as if massively high prices for everything and susceptibility to dying from viral disease weren’t enough, you can add in the possibility of having what happened to Amy Cooper happen to you. It’s hard to imagine something like this happening in Phoenix, Arizona.
UPDATE
Read this:
So maybe the hysteria was an act after all.
However, it can still be intimidating to be in a part of Central Park than can feel very desolate and deserted (if it’s early in the morning) and then encounter a big muscular black man who’s inappropriately telling you what you should be doing like he’s a cop or something except he’s not a cop. I’d be extremely on edge too, and Amy looks like a small skinny woman who would easily be physically overpowered.
I see people every day (before the pandemic that is) violating the rules in Manhattan, and I never butted in and acted like a cop.
Will work-from-home kill New York City?
Some optimists say that 9/11 didn’t kill New York City, why should the virus pandemic?
But the pandemic feels different to me in two major ways.
(1) As bad as 9/11 was, the pandemic has had a much bigger impact, and the impact is not just on New York City but the entire world. I lived in Arlington, Virginia at the time, which is where one of the planes crashed, and 9/11 had no impact on my life at all, except that I got hired for a job that was a direct result of 9/11 (increased money for hiring contractors to work at federal agencies involved I homeland security). But the pandemic has changed everyone’s lives. Nearly all white-collar workers in the entire world are now working from home.
(2) Never before in the history of mankind has the technology been as good as it is today for doing so many jobs from home. Nearly all of the remote collaboration tools I use daily didn’t exist back in 2001. Today there wasn’t a good reason for people to go to the office except for inertia. Meaning that’s the way it was always done, and certain managers saw no reason to change it because they liked managing people in person. But now it has been changed.
I think that, for health reasons, no one is going to be required to go into the office for at least another year, and by the time it’s safe (because the virus is totally gone, probably because of vaccines), everyone will be used to working from home, and renting expensive office space will seem like a waste of money to corporate CEOs.
So my bet is on New York City going into a vicious-circle type of downward spiral.
New York City will probably be Wuhan virus epicenter in USA
New York City has half a million Chinese people, more than anyplace else in the country. There were a large number of flights between China and NYC until the travel ban, and we are STILL letting people come here from China (but not Hubei province) as long as they have no symptoms and agree to self-quarantine for 14 days.
Given how the Wuhan virus has popped up in other countries with a lot of passenger travel with China, such as Japan and Singapore, I find it hard to believe that the virus is completely absent from New York City, which is the ideal place for it to spread. The population density is very high, and people crowd into subways. We probably get more international visitors than any other city in the United States (but that’s just a guess).
As far as I know, the CDC isn’t testing anyone unless they’ve been to China, but we see that today in Japan, four people were discovered to have the virus who had never been China. Every Chinese person in the hospital with pneumonia should be tested for the virus. If the virus is spreading anywhere, it would be within the Chinese community in New York City.
I’m very worried.
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The CDC must have been reading my blog! Or maybe they just have some people there with common sense. Maybe they were spooked by the sudden appearance of four cases in Japan who had no contacts to China or to anyone previously known to be infected.
New York, San Francisco and Los Angeles are the cities with the three largest Chinese populations. I don’t understand why Atlanta is on the list. Maybe just because it’s close to CDC headquarters so it’s easy for them to test there.
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Japan traced the the infection of the doctor in Wakayama Prefecture to a 70-year-old man who was treated for pneumonia. So that’s the 5th confirmed case to appear in Japan (not including cruise ships) in less than 24 hours.
Lion of the Blogosphere 