Back during the 2008 financial crisis, JP Morgan Chase took over Bear Stearns. When asked how he knew what to “pay” for BS, CEO Jamie Dimon of JPMC said something along the lines of “How do you value a house? Now how do you value that house when it’s on fire?”

Right now, NYC is that house on fire…

Last week, Moody’s Investor Service downgraded New York City.

What does that mean?

Simply, it will cost NYC more to borrow money…

But you know, it’s never good to be downgraded…

I did a simple research experiment yesterday when I walked to the supermarket. I walked down the west side of Second Avenue, between 24th and 25th St. There are seven entrances on that little strip of land. Three stores are in business. Three stores are for rent. One building is a methadone clinic.

From living around here, I know that they’ve been trying to relocate the meth clinic for years. Rent too high, building too gross.

Now let’s think about the 50% occupancy rate. How do you think something is doing when it’s only half full?

Let’s think about the life expectancy of the businesses that are still there: Subway sandwich shop, Cell phone provider, dry cleaner.

What are the chances that any, or all of these businesses survive?

Subway shops are a franchise and individually owned. This particular location was closed from March to July. I walk by there often and I rarely see anyone in there. It comes down to how much money does the owner want to use to keep this location afloat.

Cell phone provider? How many physical cell phone stores do we actually need now that we can get 24 hour shipping on a new phone?

Dry cleaner. Pre pandemic, having a cleaners was a pretty good business. There are at least 6 dry cleaners within a five minute walk of this place, including one directly across the street. On a personal level, I have not dropped off anything at the cleaners since early March. Do you think the majority are like me or not?

What is my prediction for these stores? One will be out of business by December 31. One will be out of business by March 1.

What does all this mean? Extrapolate. If every little cross section of the city were to have a 50% occupancy rate, with greater than average chance of it hitting 75%, How do you think things will work out?

I know you glass half full people are all saying: “But what about the blocks with 75% occupancy?” To which I answer…”What about the ones with 25%? What about the ones with 0?”

Empty storefronts with no hope of reopening are a bad thing…

FYI: According the the NY Restaurant Association, 9 out of 10 NYC restaurants did not make rent in August. And now they’re working at 25% capacity unless they are blessed with a great outdoor set up and pleasant weather. Even then….will it work?

So now that you get an idea about all the businesses that won’t be paying rent and taxes…

Let’s get to the meat of NYC…office space.

Right now there is still a 25% occupancy rule for NYC buildings. That aside, maybe there’s actually 15-20% of employees showing up to physical office locations. Maybe. When my husband goes into the office he can count on two hands how many people are on the floor…

You must begin to question whether or not most businesses need office space.

If you’re an employer, do you want to pay rent and taxes on locations that you really don’t need? Isn’t everyone always looking for a way to cut costs?

Do organizations need physical space?

If the answer is “No” then what do you do with all the office space?

I know that some of you are going to say: “Make them into shelters for the homeless. Or the elderly.”

Ok. Let’s think about that. For the time being we will forget the pesky little issues of rezoning, renovating, loss of rent, loss of tax revenue, and upkeep. We’ll make believe that unicorns fly over rainbows and these things don’t matter…

Do you have any idea how much office space is in Manhattan alone?

My Husband normally works in a 59 story office building that houses at least 1000 people a floor- and I’d say that’s a very conservative number…

That’s one building…

Do you know how many buildings there are?

Buildings that could go to 20% occupancy as leases run out?

Let’s take a peak at residents.

My apartment building has 17 floors of residents. Assume there are fifteen residents per floor. Now assume that half of those people got out of dodge back in March. If you could leave NYC you did…

Presently there are over 15,000 unoccupied apartments in NYC. That is a record high number of empty places. That number is only going to go up as people’s leases run out and the moving trucks come by.

But what does all this really mean?

Less people means less people spending money here, both on taxes and actual goods and services…

Taxes will go up. Services will be cut. We already know that it’s already become more expensive to borrow money because NYC is becoming a very risky investment…

Middle class people, anyone with an alternate opportunity, will start to move out…

What will be left?

Broadway- closed till at least June 2021. Philharmonic. Carnegie Hall. Madison Square Garden…empty…

Every week I show you pictures of the things that I love about my city. I do this because this is how I like to look at it. But there are other pictures I could send you, the other things I see on a daily basis…

Some of you won’t care if NYC falls. Some will actually be glad. I get that. We’re an arrogant bunch of assholes out here…

But before we completely rewrite history, think back to the 70’s…the last time NYC fell…how did the late 70’s work out for all of you?

One of our friends asked if it was a good time to invest in NYC, you know, buy low sell high. I mean, NYC does always bounce back…doesn’t matter…we just pick ourselves up, dust off and keep on keeping on.

But this time, if people don’t see a need to actually do things here, work or play or whatever…

what exactly would you be investing in?

94 thoughts on “City on Life Support…”

  2. You hit on a lot of good points! We as consumers are not frequenting any place as we had before Covid. Your dry cleaner example hit home. We used to have enough to run to the dry cleaner once a week or so, now we only go monthly or every 6 weeks. We are not going places so not wearing the clothes and Steve seems to be wearing scrubs a bit more so less there as well. And that is just one example how this crisis has snowballed on down and hurt so much of our economy!! A lot to think about!!

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      2. I went to our local sporting goods store, which isn’t a chain. They had no tennis balls. FYI…our big sports retailer is out of business. I had to order tennis balls from amazon. I can’t get things anymore, and I don’t think it’s getting better

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  5. LA, you’ve done an excellent job of making real the frightening plight of every large city across much of the world. London, Toronto, you name it. It’s truly frightening. I do believe they will rebound – a world without NYC as we know it is unthinkable – but it will take years. And years is what the small and medium-sized businesses do not have. Sad, sad, sad.

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    1. Here’s the thing…if companies find they don’t need space…what happens to the building? What happens to those who own the buildings? What happens to the taxes generated from these buildings? The businesses that surround these buildings to add support? T hits every single level. I think people forget that those referred to as the 1% often have extensive real estate holdings. If the value goes down 75%, so does their net worth. This is top to bottom. Except of course for Amazon, Microsoft, Apple and google….funny how that works…

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      1. I know. Like your husband, my son in Toronto works 50+ stories up in the air, and the thought of getting in elevators and on the subway has turned the downtown business area into a ghost town. And that’s all aside from the shuttered theatres, concert halls, and sports venues. That’s why I agree that it will take years, painful years. But I do think that innovative people will reinvent the spaces. The bankers, lawyers, and financial gurus will not want to work solely from home forever. And new hires will need ways to be integrated into the org and mentored. But it will all take time and new visions … once this virus is far more under control.

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      3. I know. That remains to be seen, of course. There will be some changes, and in some cases more spacing will be needed for the same number of people. But it will be different. Those who come up with innovative new uses will be the winners. Shopping center property owners have been dealing with how to repurpose for years. It’s going to be tough, and not quick, but my money is on NYC to figure it out! 😘

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  6. This would be terrifying if I didn’t have faith that no matter what happens, I am secure in Jesus. I believe tough times are here ( the whole country, but worse in your state ) because of Covid and will last a long time, forever if Biden gets elected. Invest? Cryptocurrency, vaccines, technology, genetics, big pharma, those will grow in these bad times. But also things that people still need like food and energy and housing.

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      1. I predict that will get worse. Data is the currency of the future. I also think we should be careful not to be totally dependent on the internet for everything because it will likely be attacked at some point.

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      2. Barnes and Noble was breached. I couldn’t access my nook app. My daughter got lucky that she was able to access her textbooks. I couldn’t get anythung. But with everyone working from home…there’s nothing without internet

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      5. Read to throw this book/year in the trash? But seriously, this is a good time to take inventory of our spiritual and physical lives and see what we are dependent on because we lose it all.

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  7. Sweet heavens.. are we ever in trouble. We may not be NYC down here, but we are dealing with similar issues. I read this morning that Canadians (who flock to South Florida every year for winter) won’t be coming..the impact on the area will be devastating. I think we are in for a second wave of pain as economic reality catches up to even the most optimistic among us.

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      1. We got an order so quickly from Amazon this week I looked up in the sky to see if there was a spaceship warehouse floating in the clouds..wouldn’t surprise me. Brave new world.. (Is it Friday yet? I need a Friday cocktail..)

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  8. I live on the west coast, same scenario, the future looks bleak. It is my hope that we figure out how to repurpose these spaces? Maybe find some competition for Amazon? Even if a vaccine is available soon I can’t imagine it is possible to reverse the damage. We have to recreate our world, jettison the virus, creativity is going to be key! C

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      1. It seems like the future is moving towards wide open spaces, less density, space to breath. The virus limits our ability to breath and maybe that’s a clue? The future is going to demand resiliency from all of us, as if a modern exodus from enslavement to devices, schedules, overly committed lives, to freedom, the promised land so to speak, we’re still wandering around in the wilderness. Never a dull moment…C

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  9. Things are bad everywhere, when all this started at the beginning of the year I remember talking to an elderly gentleman on a bus, we talked about the state of the world and I remember him saying the only way out of this is a world war, I think he could be right.

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  10. I live in Alberta. A few years ago we had wildfires here in this city that left a much reduced population. Many restaurants failed because they could not find employees to remain open. Then the oil industry bottomed out – more economic fallout. Last spring there was heavy flooding in the city, right on the heels of the pandemic coming home to roost. Economies are struggling everywhere due to the most recent blow of a pandemic. But to re-open too soon causes a strain too, strain on health services and on the economy itself as people are afraid to go out with rising number of cases. It’s all scary. Ok I am just going to go bury my head in the sand. Let me know when it’s all over.

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  11. Sad and scary. I’ve been driving through SF every day for the past month since my son got a job there and can’t drive. I take him to lessen the risk of covid exposure for our family if he takes public transit. Granted I am just making a big loop, going up one street and down another and there is a lot of construction going on so I have to be more mindful of the road and can’t see the buildings as much but there are definitely fewer things open and lots of homeless people. Today we saw someone smoking meth. It was amazing to my son. He has seen people laying in the doorways with needles still in their arms. Definitely not things we are used to seeing, but no way for us to tell if this is a regular or a sign of the covid catastrophe. I did also see a Jaguar dealership though. There is a huge voting place across the street from City Hall and drive through drop boxes for people to put their ballots in. Nice to see that. Voted yesterday!

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  12. Have you thought about leaving NYC? Does your husband have plans to report back to his office? My husband keeps getting notified that they aren’t going back and don’t when they will. We live in Palm Springs, CA and things were booming before COVID. Our one industry is tourism and that all stopped. Our main street has so many small shops and businesses boarded up. Our one saving grace is the tourists are once again flocking here to escape SF and LA. But, it has me worried for the spread of the disease as well….

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    1. My husband wants out…I’m still middling. I want to get a better handle as to whether or not he’ll be required to be in an office. If I’m moving I’m Moving to someplace warmer and quainter. I grew up in an nyc suburb…don’t want to do that again

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      2. Exactly my worry. His form just rented new office space for his department. As the new lease goes on, we’ll get a better feeling as to what the future holds

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  17. You pose, as usual, interesting questions. I tend to be a hopeful, optimistic person but I wonder if we are witnessing permanent change. Hold our breath, or just breathe. Either way we better just hang on. I wonder what things will be like a year from now? Our way of life may become tales for our great grandchildren – remember when…

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  21. Scary times everywhere. We were commenting on how many empty stores there are here. The problem with everyone using Amazon or whatever online shopping they use is the brick and mortar demise becomes a self fulfilling prophecy.

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  22. If I knew NYC zoning and tax abatements I’d be more precise, but blush…companies into green retro fitting…high speed firms having fun with fiber optics…take a hard look at how now soft the asking price of boutique hotels…and more small, make that micro cap…some Boyz and girls to ten day turnaround all those crappy and now vacant and chillingly crappy NYC apt kitchens. Three options to fit all..no ups, no extras. Nice, but sad post..yet necessary.

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  23. Sorry to hear about the state of your city. Well, it is not too different from other parts of the world. I hope your leaders do something about this. I share your frustrations and worries. Here, I would argue that things are worse, because it is a Third World country to begin with.

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  24. WoW……I know nothing about NYC apart from the very basics that I assume most do. I find your stats and info very interesting, eye-opening and pretty sobering for those who live there. Our world is definitely changing, that’s for sure. Thanks for sharing all that.

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  25. Cities in general will have to do a reset, NYC will have to do a larger one. There will be people that see this as an opportunity to get in while it is cheaper. I do believe that office space will be the first thing to go. A lot of companies are figuring that people can work from home or that they don’t need anywhere near as big a staff. Small towns and suburbs are feeling it too, but maybe I am one of those glass full types that think that we will have investment again, but cities and towns will look and feel different and operate on a different plane than before. Sorry you are experiencing this.

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  26. I think that the trend will reverse once the crisis passes. Not everyone is happy about working from home and physically distancing from co-workers. Recovery is likely to take some time, but it can turn around faster than you’d think. I’ve seen it happen in our small town and NYC would probably do it faster and better.

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    1. If you are getting the same results but have the potential to spend half as much, what do you do? Has office space outlived it’s usefulness? Is office space the newest blockbuster? While I agree companies will need satellite offices, and lawyers and finance will continue have offices, where will support staff be? Will we need support staff? My friends who work for medium to large size corporations…the first people let go were administrative assistants because they were no longer needed. Does a medium size accounting firm need three floors of a building or can they get buy with half a floor for when they have to do certain things? Will people go back to offices? Yes. The question is how many

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  28. Those who wish NYC to fail are very short sighted as it can happen anywhere. It’s a shame the leadership of the city and state has failed it’s cities and people with taxes and increased crime. I ache for everyone who is there and struggling to make things better. I understand why people have moved and don’t visit. I hope businesses can hand on until this passes. xoxox

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  29. This is so scary! And the sad thing is, not everyone sees what is happening. It’s amazing how many people think the shut downs won’t have a long-lasting effect, and actually believe the only way forward is to stay shut down for a very long time, depending on the government to support us. The same government that is in debt up to its eyeballs….. And Amazon has been open about it’s intention to be a monopoly. This pandemic has given it a terrific boost!

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    1. Bingo. I don’t know what people think is going to happen if this continues. People don’t appreciate the extent of the situation we are encroaching upon. And I just talked to you about a few points on the economics. I didn’t touch all the other stuff….Amazon, Microsoft and Apple have made themselves literally a part of our daily lives….monopoly isn’t strong enough

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  30. New York played a huge role in my life. My mom was born there. Grew up across from Columbia Univ. Went to Horace Mann. My dad commuted there from my NC birthplace then moved us to NJ so commute would be easier. Years prior he compensated for his absence by taking me in winters to see Nutcracker (Balanchine’s) and Rockefeller Center, my brother in summers to see Mets games. For me NY was the center of my universe. A place where anything was possible. I remember after 9/11 at a small town choir rehearsal in NC a choir member saying NY deserved what happened. I ditched, right then. I am heartbroken to see what is happening.

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  31. I’m reading this post almost two weeks after it’s publication. The world is trying to get back to something approaching normalcy, and cases are escalating everywhere. I’m so pissed at this virus and what it’s doing to people. I’m pissed at China, if for nothing else, than their lack of transparency regarding the cause of the pandemic. Knowing the cause might help us prevent future pandemics. We’ll get a vaccine sooner than later. I just pray that there will be a viable society left when it happens.

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