• Goodbye to a Place, Like New York

    January 15, 2021

    Posted in: Democracy

    Articles about how New York City will be reborn out of COVID better than ever, like in the 80s when she spawned the Ramones and Anthony Bourdain, miss the significance of what COVID has revealed: there is no longer a need for a place, like New York.

    Places die. Most die easy, like mining towns out in the Southwest that lasted only as long as a gold strike. Some die harder, like Youngstown and Weirton, when America found it cheaper to sacrifice its manhood and buy steel overseas. Some, like Detroit, died but just won’t admit it, caught in a pantomime of one eroding rebirth after another, maybe some local crafty manufacturing, some art districts, a high tech something, a corporate tax haven. It may find some life but there is no longer any need for a place, like Detroit.

    Same for New York, the place that had the longest and best run of all, that once was the most American place. When Dutch explorers first arrived on Manhatta Island in 1613 they had it all, centered around probably the greatest natural harbor any sailor had seen. Throw in a river system which promised deep reach into the continent (the Erie Canal proved the power of location in 1825, demanding New York, and nowhere else, to become the starting and ending point of massive amounts of Midwest commerce) and magnificent natural resources. There was no place else that could have become New York and that’s why no place ever did.

    Those commercial beginnings created the perfect storm for a place. First an infrastructure to procure and move goods to the harbor area with a financial and commercial system built around that. Sellers needed to meet buyers. Buyers needed loans from banks. Banks needed a stock exchange to raise capital, and everyone needed a physical place to do what they were doing. Alexander Hamilton founded the first New York bank in 1784, helping fund the Erie Canal which fed money into the city. In 1792 brokers created the New York Stock Exchange. Over two centuries the goods bought and sold changed wildly, but the place to do the job had to be New York.

    So the skyscraper, the quintessential symbol of New York. Skyscrapers exist for one reason: a helluva lot of people need to work in the same place. Since Manhattan is small they can’t build offices next to each other, they had to build them on top of each other. When you look at the City in profile, the clusters of skyscrapers are at one end, the Financial District — Wall Street, where the old docks were — and in Midtown, the center that grew up later around the nationwide railways terminals of Penn and Grand Central Stations as the big country got smaller. The rest of the city features mostly low-rise buildings not because of the soft soil, as the old tale goes (the underlying granite schist is similar island-wide), but because massive numbers of people did not need to work in those interstitial locations. The area of Manhattan almost devoid of tall buildings, Harlem and uptown, is also the area almost devoid of major commerce.

    That amazing harbor and direct crossing to England meant New York was the right place to establish the world’s first scheduled shipping services; ships used to wait around ports until they were full, a waste of time that stymied investors. All those ships moving daily mattered when immigrants began pouring out of Europe in the days before cheap passenger service was established. They went where the cargo ships were going, and that was New York (New Orleans for many years was the second largest immigration portal, taking in more Irish than Boston because it was also a prime cargo port.) As the Civil War ended and industrialization exploded, New York was the right place to take in millions of cheap immigrant laborers.

    The manufacturing centers that made 19th and early 20th century America were places as well. Most, like the steel towns, had to be built at the confluence of rivers, coal, and iron ore. They could not change, they were too bound to a location that served just one master need. Not New York. Unlike Detroit and much of the rest of the country, the business of New York was always being New York, and as such New York could transform itself. Publishing, fashion, the media, songwriting, entertainment, insurance, banking, investing all had to be in New York City because that is where the others were doing the same thing. The world fed talent into New York. If you could make it there you could make it anywhere.

     

    COVID did not cause the next change as much as it revealed it. The vulnerabilities of basing trillions of dollars of commerce at one location were made clear on one sharp September 11, 2001 morning. So well before COVID all of the New York Stock Exchange transactions were being processed on servers outside of Manhattan, though the famous Exchange building still stands, more a cosmetic backdrop than place of business. With the downsizing and integration of the financial business following the 2008 crisis, coupled with mass changes in communications, business no longer needed to happen in any one place. Since 2018 migration to New York was negative. By 2020 NYC’s “Financial District” was well over 80 percent residential, with the last of the big banks, Deutsche, scheduled to leave the area soon. Mobile phone location data put December foot traffic in the Financial District at only 20 percent of what it was in 2019. Subway ridership shows a 70 percent drop.

    COVID forced businesses to realize everywhere was somewhere and nowhere was a place. People in all sorts of businesses could work from wherever they wanted to live. The physical office, if needed, could be in a cheaper, warmer, safer location, with better schools, better governed, with a higher quality of life than New York. That change opened up the talent pool globally (who needs those pesky H-1 visas if your Chinese employees work from China?) When COVID asked the question “Why do we need an office in New York?” nobody had an answer.

    And so Goldman Sachs is looking at South Florida. JPMorgan Chase is weighing Texas. The rebuilt World Trade Center was already 20 percent empty before COVID; post-COVID it is losing its majority client Conde Nast, who once leased 23 floors. The majority client after Conde is now the U.S. Government General Services Administration. It is unclear how the building can be profitable so empty.

    It is a very strange thing to walk the business districts at midday and see New York without the New Yorkers. It all has the feel of a Twilight Zone set. Only about 17 percent of office workers have returned since the ban was lifted. New York’s commercial tenants meanwhile dumped more than 2.5 million square feet of sublease space in the year’s third quarter, a number unseen since the Great Recession.

    Meanwhile, about 3.57 million people moved out of New York City during the pandemic, resulting in $34 billion in lost income. Though businesses are closing across the city, a survey of national chains reveals the true demographic shift. Starbucks closed 54 stores, Victoria’s Secret and GNC about half their outlets, while cheap chicken Popeye’s was the only brand to increase its stores. More residents escaped from New York over the last year than from any other state, to the point where a House seat is threatened.

    It could not be simpler. The wealthy and the companies they work for pay most of the taxes. The top one percent of NYC taxpayers pay nearly 50 percent of all personal income taxes. Property taxes add in more than a billion dollars a year in revenue, about half of that generated by office space. The poor consume the taxes through social programs. The number of New Yorkers living below the poverty line is larger than the population of Philadelphia. COVID is driving the wealthy and their offices out of the city. No one will be left to pay for the poor, who are stuck here, and the city risks collapse. A classic failed state scenario.

    New York once topped the global list of desirable places for the wealthy to live based on four factors: wealth, investment, lifestyle and future. The first meant a desire to live among other wealthy people (we know where that’s headed), investment returns on real estate (not looking great, if you can even find a buyer), lifestyle (bars, restaurants, shopping, and theaters are locked down, coupled with rising crime, shootings double, murder up 40 percent, what NYC cheerleaders call “grit”) and how does the future look?

    Places die. For many there is no coming back. Of course people will still want to live in New York, and at some point offices will see some return. But the need to be here is gone, that is what is different from every other time New York stumbled, a victim of technology and changing views of how to live. COVID accelerated a terrible trend, and some of the worst progressive governance in history made every step of the process worse than it needed to be. New York, New York, it’s a helluva town!

     

    Related Articles:




    Copyright © 2020. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.

  • Recent Comments

    • John Poole said...

      1

      No loss. I’m hoping the Irish Rep will relocate to Philly or better yet- Bryn Mawr. Any word from Sinatra? He’s buried near Palm Springs instead of Hoboken so maybe he’s cool with the demise.

      01/15/21 9:55 AM | Comment Link

    • John Poole said...

      2

      I greatly appreciate this respectfully restrained eulogy. I will miss the live Hudson Valley Shakespeare Festival productions and also the Irish Reps offerings but the rapid decline and collapse might mean that creative souls will now have to set out for distant modest artistic climes thus enriching this vast nation.

      01/15/21 3:29 PM | Comment Link

    Leave A Comment

    Mail (will not be published) (required)