Saturday, December 19, 2020

Is Wall Street Becoming a Ghost Town?

Another day, another story about New York’s commercial real estate bust. This time, from a slightly left-of-center British publication,  The Guardian. One ought to distinguish honest newspapers, from the Guardian, from dishonest and unethical outfits like the New York Times.

The Guardian reports from Wall Street, which has currently become a ghost town. Remember the Occupy Wall Street Movement-- well, if things keep going as they are going there isn’t going to be any Wall Street to occupy.

The story begins at an empty bar-- as good a sign as any of a moribund neighborhood. 

“They used to stand at the bar three deep,” says John Moran, surveying the long, empty counter at Killarney Rose, a Wall Street bar that would, in another era, have been stuffed with early-shift construction workers and, at lunch and late into the evening, suited bankers.

Wall Street has become a ghost town:

The world’s pre-eminent financial thoroughfare – at least throughout the 20th century – is a ghost of what it once was. The New York Stock Exchange and Nasdaq are still located here, but dozens of financial institutions have emptied out from New York’s financial district in an exodus that started in the wake of 9/11 and has been hastened by Covid.

The Guardian notes that JP Morgan is departing because New York’s communist mayor did not seem to want it to stay. As noted here, Goldman Sachs is considering a partial move to Florida:

JP Morgan, which was headquartered at 23 Wall Street from 1869, is following a plan to move jobs out of Manhattan after the mayor, Bill de Blasio, denied the bank $1bn in tax incentives to keep employees in New York. Last week Bloomberg reported that Goldman Sachs was weighing plans for a new Florida hub to house its key asset management division, in part to cut $1.3bn in costs.

Goldman Sachs is thinking of moving asset management operations to Florida. The Guardian points out that moving what it calls client-facing operations out of the city is a very bad sign.

But it’s one thing to relocate administrative, technology and business operations jobs, and another to move client-facing operations – a move that could diminish New York’s prestige as home of the US financial industry and exacerbate its projected $9bn budget deficit over the next two years.

But, the move out of Wall Street has been ongoing for years now:

If Goldman leaves its Wall Street-adjacent HQ, it will follow Morgan Stanley, which relocated in the mid-1990s, and JP Morgan, which quit in 2000. Credit Suisse, Barclays, UBS and others have established hubs in Florida, Tennessee, North Carolina and Utah.

Of course, businesses that rely on finance people have been closing. If not, they are looking like they are going to close:

Businesses that had survived the exodus of bankers have been hit hard by the pandemic. China Chalet, a popular restaurant turned nightclub, has closed for good. LVMH-owned Tiffany was on Monday empty of pre-holiday shoppers. Cobblers and barbers are starved for custom. “You see the situation. There’s nobody here,” said one.

Besides, John Moran notes, the millennial generation is more homebound, and less concerned with socializing after work:

Moran said: “The new crowd, the millennials, are a totally different animal. It’s all 50-inch TVs, staying home and having a few friends over for a takeout. Technology has changed everything. You don’t see people. When this Covid business is over, the buildings are going to come back half-full. And that’s a fact.”

A real estate agent-- who better to give us a picture of facts on the ground-- sees a bleak future:

The estate agent Colliers International painted a bleaker picture, reporting that leasing was down by nearly 80% compared with a year ago and down by 55% from October. “This is higher than what it was in the Great Recession [of 2008-9] and higher than what it was in the 2001 recession,” said Collier’s Franklin Wallach.

Of course, some real estate has been snapped up by big tech firms, like Apple and Amazon and Google. But, it will not be enough. Note that Conde Nast, a main tenant of the new World Trade Center is trying to get out of its lease:

The tech and media sectors and residential property have so far failed to inject comparable energy into the area. Apple and Amazon have leased large spaces near Penn Station, the city’s main transport hub that is within striking distance of Google’s vast westside HQ. The publisher Condé Nast, a key tenant at One World Trade Center, is reportedly looking to get out of a $2bn real estate deal that had in any case been subsidised by raised tolls at the city’s approaches.

Some have managed to suggest that social distancing requirements would cause companies to lease more space. One investor strongly demurs:

Richard Rubin, a west coast-based investor turning distressed hotels into residential properties, rejected as “preposterous” the notion that companies would need more office space because of social distancing. 

“There’s been a seismic shift in the last year and we know from a productivity perspective that people are working very effectively from home,” Rubin said.

He predicted there would be “absolute carnage in the commercial office market that will dwarf the carnage of retail”. Wall Street’s spectacular physical topography, then, may be all that remains.

“Companies have been paying exorbitant rates for someone to eat their crisps, drink the coffee and use the company gym. Given what’s going on in the world in every respect, I’m not sure that’s something that can continue.”

Not what we would call pre-Christmas cheer.


trigger warning said...

I recall people mocking Occupy Wall St (and I was one of the Mockateers). But in a very real sense, Occupy Wall St won. Hate to say it, and I don't deny the OWS types have been greatly aided by the 'Rona, but the virus didn't re-elect the Mayor with 65% of the vote.

Sam L. said...

I am soooooooooooooooooooooooooooooooooooooo not bummed to read this. NYC had done it to themselves by voting in Cuomo and the governor. One wonders, if these people are so smart, why they haven't already left NYC.

Subsuburban said...

My initial reaction is to feel sympathy for the small business owners who have been affected by this concatenation of unfortunate events. However, it remains true that the citizens of NYC decided to vote themselves a communist for mayor and a totalitarian (a theoretical difference only) for governor. It's as if the passengers on the Titanic voted to steam into the iceberg, so my sympathy is muted. However, I can't help but extrapolate to our recent presidential election (assuming, for the moment the remote possibility that it was fairly decided) and wonder what cohort of my fellow passengers voted to steam into the iceberg? I sure as Hell did not, but I may be scrambling for a seat in a lifeboat regardless.

David Foster said...

re Steaming into the Iceberg, here's an alternative nautical analogy. One of the best memoirs of life in inter-war German was written by Sebastian Haffner.

In spring of 1933, after Hitler had assumed the chancellorship, Haffner attended Berlin’s Carnival–an event at which one would find a girlfriend or boyfriend for the night and exchange phone numbers in the morning…”By then you usually know whether it is the start of something that you would like to take further, or whether you have just earned yourself a hangover.” He had a hard time getting in the Carnival mood, however:

"All at once I had a strange, dizzy feeling. I felt as though I was inescapably imprisoned with all these young people in a giant ship that was rolling and pitching. We were dancing on its lowest, narrowest deck, while on the bridge it was being decided to flood that deck and drown every last one of us."

Of course, a lot of people...not a majority, but almost a majority...had voted to put those officers on the bridge.