Wednesday, September 30, 2020

Is New York City Going Bankrupt?

Things around Manhattan seem to be improving… sorta. Madison Avenue shops are reopening. New businesses are starting up on the great shopping mecca. And traffic is returning to New York streets. Palpably. As you walk around town, there are no longer any empty streets.

And yet, few political leaders have been quite as inept as Mayor Bill de Blasio. And that does not even include the Lord High Executioner of the coronavirus, Gov. Andrew Cuomo. 

On the other side of the coin, office workers are not coming back to their offices. At least, not at a level that will make much of a difference in the city’s ailing economy.

The Wall Street Journal reports:

Manhattan office employees are returning to work at a much slower pace than those in most other major U.S. cities, raising the risk that New York faces a more protracted and painful recovery from the coronavirus pandemic than much of the rest of the country….

Overall, about 10% of Manhattan office workers were back as of Sept. 18, according to CBRE Group Inc., a commercial real estate services firm.

That represents only a modest uptick from the 6% to 8% who were back in July, a month after the city allowed nonessential workers to return for the first time since offices closed in March because of the pandemic. The monthslong stretch of near-empty office buildings has had a debilitating knock-on effect in Midtown Manhattan and other business districts, leading many small shops and restaurants to shut down for good.

How does this compare to the rest of the country? Unfavorably, as you might guess:

Nationally, about 25% of office workers have returned as of this month, on average, according to real-estate services firms. Some large metropolitan areas are considerably higher, such as Dallas at 40% and the Los Angeles metro area at 32%, industry professionals say. The reoccupation rate in New York’s suburbs is 32%, according to CBRE, which manages 20 million square feet of office property in the region.

Now, the issue is, why is this happening. The Journal does not emphasize incompetent political leadership, but it does list some other factors:

But a number of civic and business leaders say New York’s reliance on mass transit—and concerns that the new coronavirus could spread through subways, buses or regional trains—has kept many people working from home. Cities that have more driving commuters have seen a higher percentage of workers return.

Some also say that delays in New York public schools’ reopening has made parents reluctant to return to the office if it means leaving children at home alone.

Children around the world are back in school. New York City’s incompetent administration has shut that down, the better to cripple the economy and to score political points against Donald Trump.

Of course, New York is suffering other ills:

New Yorkers’ slow return to the workplace is the latest blow to the nation’s biggest city, which has also suffered from homeowners fleeing Manhattan for larger spaces, rises in murders and homelessness, and the shutting or partial closings of Broadway theaters, museums and other popular attractions.

The dearth of employees at their desks could also have long-term consequences for the city’s economy and tax base. The Metropolitan Transportation Authority, which relies heavily on commuter revenue, faces a $12 billion shortfall by the end of 2021 and is considering crippling service cuts. Manhattan’s low office turnout also has contributed to a $9 billion drop in sales tax and other revenue the city government is projecting for its fiscal year that started July 1.

As we have often noted, Democratic administrations are sorely in need of federal government funds to bail them out of their own ineptitude.

For many businesses it will be too little, too late. Zero Hedge blog reports on the avalanche of bankruptcy filings, via Bloomberg:

While Wall Street panic buys stocks again, on hopes Washington can pass the next round of much-needed economic stimulus, the broader commercial real estate market continues to implode and nowhere more so than the epicenter in New York City, where nearly 6,000 business closures, has resulted in a 40% eruption in bankruptcy filings across business districts of all five boroughs this year, reported Bloomberg

And there are more coming:

Al Togut, a bankruptcy lawyer who has handled insolvencies for small firms to mega-corporations, said, "by late fall, there will be an avalanche of bankruptcies ... When the cold weather comes, that's when we'll start to see a surge in bankruptcies in New York City."

The coming wave of business closings, as explained in "Old Man Winter To Plunge Restaurants Into Further Chaos," is set to crush eateries and other small businesses in NYC ahead of the holiday season. 

The numbers are staggering. One understands that outdoor dining will not be able to continue for very much longer. And, what with the limitations on indoor dining, coupled with the empty office towers, the city is in big trouble.

Zero Hedge continues:

The Partnership for New York City, a nonprofit membership organization of NYC's top businesses, warned the virus pandemic could permanently close a third of the 230,000 businesses across all five boroughs. 

Bankruptcy filings in the region have skyrocketed since the middle of March, when the state of New York reported its first deaths from Covid-19 and Governor Andrew Cuomo closed all nonessential businesses. There were 610 filings in the Southern and Eastern Districts of New York from March 16 to Sept. 27, according to court records. That's a 40 percent jump from the same period in 2019 and the most by far for any year since the financial crisis. The districts include some nearby counties.

Almost 6,000 New York City businesses closed from March 1 to Sept. 11, according to Yelp, the website of user reviews. Over 4,000 of those closed permanently.

The carnage has been demoralizing after decades in which the city fought back from the brink of bankruptcy, the scourges of crack cocaine and violent crime, terrorist attacks and recession. The pandemic hit as the city had achieved record high employment and low crime. - Bloomberg

That’s the latest from the Big Apple-- rotten at the core.


Fredrick said...

Watching DeBlasio's ideological driven leadership destroy NYC reminds me of Theodore Dalrymple's commentary "Why Havana Had to Die". This will all be blamed on Capitalism, Trump and his supporters, and the "systemic racism" from the fouding of the Republic to the present.

Giordano Bruno said...

This is not just NYC. The successive waves to come:

1. School loan defaults
2. Evictions of renters who are months past due and the counter-eviction movement causing defaults on properties
3. Commercial real estate collapse
4. City revenues in free fall
5. Small business bankruptcies
6. Retail, restaurant, and hospitality continues to decline
7. The collapse of government revenues at every level

I see big structural changes all across the board

Best job security right now is at a grocery store.

Fredrick said...


the best job security is to be an elected democrat who decared small businesses "non-essential", thus setting into motion #2,3,4,5 and 6 of your laundry list. School loans can't be defaulted on, but plenty can start suing schools for fraud for selling diplomas whose sole values were were income generation for universities and social signaling for recipients.

Giordano Bruno said...

"plenty can start suing schools for fraud for selling diplomas whose sole values were were income generation for universities and social signaling for recipients."

Oh, please, yes, let this occur, yes, please. Marvelous idea.

True, you cannot default, but you can stop paying, or pay very little. Having all that money deferred will place great strain on the entire financial system, and on the federal government. Trying to recoup a 100k debt from an unemployed halfwit isn't going to end well eventually, whatever the law says. And if the parents are broke, who do they go to next?