New York City's Comeback in Doubt

Is New York City really coming back? From a cursory glance at press coverage you would think so. After all, residential real estate seems mostly to be strong. Apartments are being rented at exorbitant rates. Condos and Coops are selling. On the commercial front, Google just bought a West Side building for $2 billion or so.

Moreover, the reign of Comrade Bill de Blasio is mercifully coming to an end. The presumptive new mayor, one Eric Adams, will certainly be an improvement-- how could he not. But Adams is making all the right noises now, so there is some cause for optimism on the political front. 

And yet, the news from the non-tech commercial real estate world is not quite as encouraging. 

Zero Hedge reports:

A year and a half, or approximately 18 months, into what the World Health Organization formally declared a virus pandemic in early March 2020, the remote work trend is still holding strong and pressuring commercial real estate in NYC. 

By their calculations it will take four more years for things to return to normal. Of course, that does not just involve real estate developers. It involves the banks who hold them mortgages, the shops and restaurants that dot the business district streets, even the push cart vendors.

Goldfarb wrote that Class A rents have fallen, and there is an expectation for further declines. He doesn't see a full rent recovery until 2025 as vacancies will remain stubbornly high due to increasing supply. 

Technology has made virtual conference calls possible from remote areas. The emergence of new COVID variants and breakthrough infections are keeping people out of the office and remote working until at least early 2022. Without workers returning to offices, the economic rebound in the metro area will remain lackluster compared to the rest of the country. 

So, that’s bringing you up to date on the state of New York City.