Which neighborhoods will take biggest knock? - RealDeal says FiDi

http://ny.therealdeal.com/articles/which-neighborhoods-will-take-biggest-knock-2 Which neighborhoods will take biggest knock? FiDi seen as leading bear market victim; $3 million-plus units to get hit hard everywhere The Financial District, which has a number of new condo and high-end rental projects, could be among the first neighborhoods to see price drops. By Alex Ulam With New York City's... [more]

http://ny.therealdeal.com/articles/which-neighborhoods-will-take-biggest-knock-2 Which neighborhoods will take biggest knock? FiDi seen as leading bear market victim; $3 million-plus units to get hit hard everywhere The Financial District, which has a number of new condo and high-end rental projects, could be among the first neighborhoods to see price drops. By Alex Ulam With New York City's financial sector freefalling, real estate industry insiders are expecting price drops across the board. But certain neighborhoods will probably be hit harder than others by the chaos on Wall Street. Outer-borough neighborhoods and fringe areas in places like upper Manhattan are already feeling softening because of the overall dampened economy. However, the Financial District, the Upper East Side, Midtown and certain suburbs that are popular among Wall Streeters are likely to feel the most impact from the financial service layoffs, brokers said. Daniel Baum, chief executive officer of the Real Estate Group New York, a brokerage, said the Financial District, which has a number of new condo and high-end rental projects, could be among the first neighborhoods to see price drops. "A lot of financial people chose to live in the Downtown market because of the ease of being able to walk right out their door to their office," he said. "So it wouldn't surprise me to see sluggish sales in that area." Baum also singled out the Upper East Side. "A lot of middle management people have established their families there," he said. "And I don't see them looking to upgrade." In the past year, the city's financial sector has lost approximately 10,000 jobs. Last month — when it was shaken to its core with Lehman Brothers' bankruptcy filing and purchase by Barclays, Bank of America's acquisition of Merrill Lynch, JPMorgan's buyout of Washington Mutual and several other emergency rescue deals — the New York State Department of Labor projected that an additional 40,000 jobs could be eliminated in the coming year. Barry Hersh, clinical assistant professor at New York University's Real Estate Institute, said that the direct impact of the layoffs could be felt in a wide variety of neighborhoods, especially those in close proximity to financial services firms. While the swing factor would be how many residents bought in those neighborhoods in expectation of an easy commute, neighborhoods that Hersh mentioned as possibly vulnerable include Midtown near the Plaza Hotel (where a lot of hedge funds are clustered), Long Island City, and even Hoboken. "More than half of Wall Street's business is in Midtown," Hersh said. "And it will also affect Westchester and Greenwich." Hersh noted also that next year, the real estate market will not experience the bumps in prices that it generally has had in February and March, when many traders and investment bankers typically receive their bonuses. (Last month, the state's comptroller said bonus reductions on Wall Street could rival the cuts seen after the 2001 terrorist attacks, with bonuses off by 50 percent.) The fallout, of course, would not only reduce the tax revenue the city and state would collect (Governor David Paterson said every 10 percent drop in bonus money would cost the state $350 million), but would also mean less Wall Street money going into real estate purchases. Last year, Wall Street bonuses totaled $33.2 billion, or an average of about $180,000 a person. That figure was down 2 percent from the record in 2006. Other sources noted that financial sector workers are too broadly dispersed to make any accurate predictions about which neighborhoods will see the most impact. "If you look at the city as a whole, the amount of layoffs is still a small percentage of the people who live here," said Noah Freedman, principal in the real estate brokerage Bond New York. "I wouldn't say that more than 5 percent of the people we deal with work on Wall Street," he said, adding, "I think that what will have an impact on real estate here will be the overall slump in the economy." In general, Wall Street's employees account for only about 5 percent of the city's jobs. However, according to city stats, they account for 23 percent of all wages earned in the five boroughs. Some sources said that the biggest impact of the Wall Street meltdown may show up at one particular price point — in markdowns of trophy apartments. "There are more apartments on the market for more than $20 million than there have been for a very long time," said Barbara Fox, president of the Fox Residential Group, an Upper East Side boutique real estate firm. "That is the Wall Street market with the big bonuses — that is the market that is going to be the most significantly affected." Jonathan Miller, president of Miller Samuel, the real estate appraisal and consultant business, also sees Wall Street's recent travails as impacting buyers and sellers in specific price strata rather than in certain neighborhoods. But in contrast to Fox, he pegged a slightly lower price bracket as the one that is likely to feel the most pain. "I would say that the bottom half of the top 10 percent is going to be more affected than the top," Miller said. "I see that there is a higher concentration of Wall Street at the $3 to $8 million range versus the $8 million and above. I just think that price point is more vulnerable whether it is the Upper East Side or Downtown — I think that there is a stereotype that investment bankers only buy Park Avenue co-ops, which is untrue." [less]