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Don’t believe all you see in the news: New York City is not disappearing.
It has certainly been hard hit. The Big Apple has become the epicenter of the coronavirus pandemic. The death toll is high, the anxiety is deep and the images are brutal. But New York is tough. It has seen big crisis before. Actually, in the last 20 years, it has been the setting of three of the biggest world crises: 9/11, the Global Financial Crisis and, now, the coronavirus pandemic.
And New York has always come back stronger than ever. The September 11 attacks gave way to an unprecedented era on Wall Street and for Manhattan real estate. The 2008 Great Recession set the stage for the tech boom in New York and the rebirth of Brooklyn. Each time, naysayers proclaimed the death of the city. Each time, our city roared louder. What will the pandemic breed when the crisis is over?
The resilience of New York is such that the real estate market became soft for only six to nine months after 9/11 before bouncing back. And resiliency is a trademark of the Big Apple. It is home to the gritty, to the ambitious and to the best of the best brains in all sectors — all at once. It is no longer solely a financial center. The tech industry is now a prominent sector. Facebook, Amazon, Google and Apple have all recently made highly substantial investments in and commitments to New York to expand their footprints. Madison Avenue is still the preeminent advertising hub of the world. Manhattan is a world capital for the media industry and features a very strong base of healthcare employment, often tied into top universities like Columbia, NYU, Cornell and The Rockefeller University.
The City That Never Sleeps has extensive nightlife, employing nearly 300,000 professionals. It is also a tourism powerhouse, hosting over 65 millions travelers per year. It is a fashion mecca (180,000 employees over 900 companies) and it has a large manufacturing sector (think of the Garment District), which is now foreseen to expand, after decades of outsourcing threatened its survival. And it has the size of a stand-alone country, with almost 20 million inhabitants for the whole metropolitan area.
New York restaurants and small businesses may permanently close en masse just like during the financial crisis, but they will be recreated, revisited and will reopen under new forms and concepts and make the city leap forward. Recall that food courts and coworking began to thrive after 2008. Our lifestyles will evolve, and we will witness a new wave of innovation once the pandemic is defeated.
Importantly, one of the main differences between this crisis and the Financial Crisis thus far is that there is less exodus from the city. Despite heavy job losses, the unemployed are currently receiving increased government benefits enacted by the recent CARES Act. For some, this will sum up to a multiple of rent payments. Hence, fewer inhabitants are likely to move out, and I believe it will be a faster process to “restart” New York as the full economy reopens.
Pleasantly, there is a general sense of the will by public officials not to just restart, but to improve and move forward. We can expect to see investments in infrastructure, starting with the public transportation authority, the MTA, which was already close to the brink financially before March.
Additionally, prior to the coronavirus crisis, the dialogue between the private and the public sectors tended to be confrontational. Nevertheless, both sectors have come together to assist New Yorkers hand-in-hand. Everyone has witnessed how the local ecosystem is linked, from a public health crisis to the government’s stimulus package to banks distributing it to small businesses, which have shown to be the bloodline that they are to keep individuals employed and paid. As I see it, the crisis has created a much-needed sense of togetherness. The will to bring back the economy to where it was can be sensed everywhere today. From there, my belief is that businesses will snap back and keep thriving in New York, bringing the real estate market along for the ride.
Last but not least, a powerful factor will help New York urbanism: the Fed and Treasury department is anticipated to inject trillions of dollars into the economy to help the economy heal. And the Fed has already cut back the interest rates to 0%. Typically, major real estate markets attract many of these dollars, and none is more major than the Big Apple. Low interest rates are direct stimuli on hard assets, and with the magnitude of the current money printing, investors will look at New York real estate just like they look at gold: as a hedge against inflation.
Once the pandemic is behind us, New York City should attract ample capital again, leading to job creations in the most forward-looking industries, renewal and investments in infrastructure. The tech boom will continue. So will the nascent cryptocurrency industry. The Brooklyn rebirth will develop all the more, pushing urban renewal deeper and deeper into untouched areas and with, hopefully, a better partnership between public officials and real estate investors. Every cloud has a silver lining.