New York City has been pushed into an economic death spiral by the state’s Governor Andrew Cuomo and Mayor Bill de Blasio who both have imposed tyrannical restrictions. Having destroyed thousands of businesses and hundreds of thousands of lives, their lockdown rules served as a powerful sedative for the “City that never sleeps”… which is now slipping into a coma.
From Wall Street to Times Square, from Broadway to the Meat Packing District… East Side, West Side, all around the town, the “light fantastic on the sidewalks of New York” are burned out. There’s no dancing in the street.
Midtown is no town. Dead and empty. Bars are barren, Broadway is locked down, restaurants are closed, stores are boarded up, hotels closing down, tourists are gone, homicides are skyrocketing… from uptown to downtown, homeless fill the streets.
Unlike the bounce back after the Panic of ’08, and beyond the economically devastating lockdown rules, another prime reason there will be no big rebound is the alteration of securities trading laws. In the past, stocks could not legally be traded outside of lower Manhattan, so, in previous eras, when NYC fell on hard times, finance provided the anchor for the tax base.
Since the restrictions were imposed, finance has steadily fled the island for more tax friendly locations… and, this time, they have left for good. Not only are the tax benefits attractive elsewhere, but since the politicians have beaten the joy and energy out of the City, it no longer has the dynamic energy that earned it the title of “Center of the World.”
From coast to coast, east to west, Manhattan was the status symbol of America. Thus, as we analyze the current events forming future trends, as goes New York City, so goes America.
The following are some of the facts and hard data that portend dark times ahead for once-bustling and great New York City.
HALF OF NEW YORK CITY BARS AND RESTAURANTS MAY DISAPPEAR. Half of New York City’s 24,000 bars and restaurants may close permanently as a result of the economic shutdown, according to a report from Thomas DiNapoli, the New York State comptroller.
These businesses employed 318,000 people before the pandemic but only 91,000 were still working in April, the report said. The number has since risen to 174,000 but remains barely half of the sector’s workforce at full strength.
About 44 percent of the city’s restaurant workers are Hispanic, the report noted, meaning that Hispanic neighborhoods in the city and surrounding areas have been particularly damaged by the shutdown.
“The devastation is clear,” DiNapoli said.
About a third of the city’s restaurants and half its bars that were open in February remain closed now, an analysis of credit card data shows. In a worst-case scenario, half of eateries will close permanently by next September, several studies have calculated.
TIME RUNNING OUT FOR TIMES SQUARE. While some areas of New York City have seen the beginnings of an economic recovery, even if temporary, the fabled Times Square has been left out.
The area is heavily dependent on tourists. But in August, only 87,219 visitors passed through the square, compared to 404,181 in August 2019 and 50 million in all of 2017, according to city data.
Broadway theaters, the neighborhood’s $1.8-billion economic engine that sold 14 million tickets last year, are closed until January at least, leaving at least 33,000 people out of work.
The square’s businesses also rely on office commuters. Only about 10 percent of office workers have returned to the city and the district’s retail vacancy rates are the city’s highest; almost 25 percent of the shops were available for lease during the second quarter.
The “Times Square economy” had generated about $58 billion in economic activity in 2016 and accounted for about 15 percent of the city’s entire GDP, according to a study for the nonprofit Times Square Alliance.
As commuters and businesses desert the area, burglars and the homeless have moved in, sparking worry the area is in a tailspin.
Others see the closing of tourist-oriented businesses as a way to make the square a mecca for city residents, perhaps converting some closed hotels to apartments and casting more streets as pedestrian-only boulevards.
“Without a Times Square recovery, New York is unlikely to truly recover,” the New York Times commented in a recent article.
BANKRUPTCIES SURGE 40 PERCENT IN NEW YORK CITY. More than 6,000 New York City businesses have closed since the pandemic arrived, 4,000 of them permanently, according to review website Yelp.
As a result, 610 commercial bankruptcies were filed in the city from March 16 through 27 September, a 40-percent increase over the same period a year earlier, Bloomberg reported, and far more than in any year since the Great Recession.
When temperatures regularly fall “below 60 degrees… 25 to 50 percent of restaurants in New York City will not come back,” predicted restaurant consultant Vin McCann.
In September, a group of the city’s eateries filed a class action suit against the state of New York, claiming $2 billion in damages on behalf of the city’s 24,000 bars and restaurants.
Only about 15 percent of office workers have returned to their downtown suites and “retail and real estate will continue to decline until you can reignite office traffic,” said Joseph Malfitano, a bankruptcy counselor.
“By late fall, there will be an avalanche of bankruptcies,” said Al Togue, a bankruptcy lawyer. “When the cold weather comes, that’s when we’ll start to see a surge.”
MANHATTAN APARTMENT SALES CRATER. The number of Manhattan apartment sales fell 46 percent in the third quarter, leaving 10,000 flats vacant as urbanites fled to outlying areas and Florida, according to reports by real estate agencies.
In September, home sales rose 76 percent in the Hamptons on Long Island, 56 percent in Westchester County, and 36 percent in Connecticut’s Fairfield County.
In Florida, signed contracts rose 62 percent in Palm Beach County and 21 percent in Miami-Dade.
Manhattan apartments that were sold were discounted an average of 9 percent, almost double the 5 percent that pertained last year.
New York faced a glut of luxury apartments before the pandemic and economic shutdown and more have been dumped onto the market since.
The typical price of Manhattan flats is about 25 percent lower than at the peak in 2015 and 2016, which is likely to lure buyers, said Jonathan Miller, CEO of Miller Samuel, a real estate consulting firm.
As people leave the city and the tax base shrinks, remaining residents will be called on to fill the budget gap and face reduced services, perhaps leading to less frequent garbage pick-up, rising crime, and other quality-of-life deficits.
That prospect could make potential buyers hesitate.
“I don’t see an improvement in the market in the fourth quarter, but we could see notable improvement in 2021,” Miller said.
NEW YORK CITY STARES INTO FINANCIAL ABYSS. Mounting business failures. Two-thirds of its hotel rooms empty. A $2-billion loss of income tax revenue from residents this year. A 16-percent unemployment rate, twice the national pace, and a 44-percent rate among restaurant and hotel workers.
New York City is facing a financial crisis unparalleled since the 1970s.
The city is forecast to lose about $9 billion in overall revenue this year, more than 10 percent of its annual $86-billion budget.
The city gains most of its revenue from taxes on income, real estate, and retail sales. All are in a tailspin.
Income tax collections fell 11 percent during September’s second week, the fifth consecutive week of shrinking revenues.
August’s apartment vacancy rate in Manhattan rose above 5 percent for the first time, leaving many landlords, especially smaller ones, struggling to pay their property taxes.
The owner of the historic Flatiron Building, desperate to hold a tenant, offered the company free rent until 2021; the company declined, expecting it could find an even better deal elsewhere. The value of the Empire State Realty Trust, which owns the iconic Empire State Building, has fallen by half this year.
Sales tax revenue dropped 35 percent in the second quarter and is down 15 percent on the year to date.
With tourists and commuters gone, cornerstones of the city’s retail corridors also have vanished. Brooks Brothers and Neiman Marcus are bankrupt; Macy’s is concentrating on its suburban stores; and smaller stores are fleeing empty streets and still-astronomical rents.
New York State, coping with its own $14-billion budget hole, has offered the city no help.
Now the administration of mayor Bill de Blasio is petitioning the state for permission to borrow $5 billion over 30 years from other lenders.
Some analysts say the arrangement would not permanently solve the city’s fiscal woes but only delay the inevitable layoff of as many as 22,000 municipal workers and drastic cuts to city services.
Critics complain that de Blasio lagged far behind the crisis in offering plans to meet the fiscal shortfall.
