Are we having fun yet? (corona)

Here is today's NYT article about how the city is screwed.

"City officials and business leaders privately expressed concern that, with executives seeing just how well their companies could operate remotely, some might decide to downsize, or move out of New York City altogether."

https://www.nytimes.com/2020/04/20/nyregion/new-york-economy-coronavirus.html

I wonder what tomorrow's will say?

A few days ago Morgan Stanley CEO told Bloomberg “We’ve proven we can operate with no footprint."

https://www.crainsnewyork.com/economy/pandemic-could-trigger-urban-flight?utm_source=trending-now-&utm_medium=email&utm_campaign=20200420&utm_content=hero-headline

This article seemed more optimistic.

Read the comments in these articles most are wonderfully New York and optimistic!

"Jason
Bayside, N.Y.5h ago
Times Pick
People's memories are short. Remember after 9/11 when people question who would want to live in the city anymore? Especially downtown? Recall the "white flight" of the 60s and 70s? Cities all have their ups and downs, but the great ones recover, rebuild, and renew. Consider; Rome, Paris, London, New York. The first three much older and through invasion, collapse, fire, pandemic, unrest, etc. were flourishing prior to Covid. New York will thrive once again, it may take some time, but this fourth-generation born New Yorker isn't worried. History is on our side.

9 Replies346 RecommendShare"

It seems we're arguing about time frame. The City will be fine, long term. But we're about to go through a tremendous amount of change, and some of it will be for the better, imo. I'm enjoying my tourist-free neighborhood! But we will need a huge federal bailout, the promise of which seems uncertain, and not sure how we unwind the commercial real estate question. These rents aren't sustainable, and haven't been for a long while. So there's some short and medium term pain coming, and we're all just guessing at how it plays out. We haven't even begun to live through it.

Organizational research has shown that telecommuting can work, once high-trust relationships have been established. The conclusion I saw was that team members need to be together 40-60% of the time to maximize effectiveness.

My team at work is seven people. Right now only three are at home in NYC; the rest are between 200 and 2,000 miles away and will be for the foreseeable future. It's been working fine, but that's in part due us all being mature adults with some of us having worked together for almost 20 years.

One of the biggest problems we have right now is that we would like to hire another fairly junior person, but hard to imagine how that will be productive without face-to-face exposure. It usually takes us a year to hit the breakeven point where a new hire is contributing value rather than consuming, and nobody has the bandwidth or desire right now to see how that would go on a remote basis.

The other group at work is significantly larger and younger. There's a lot of concern over there about how productive the younger members are without adult supervision, and a lot of pressure to get them back to the office ASAP.

With respect to personal real estate, if things do crash then I really hope my neighbor decides to permanently bail for the suburbs so I can combine the units.

@jas: I'd love to see a source for your 40-60% of together time -- my group is thinking about our next steps - how much time in/out of the office, and any supporting info would be appreciated. I agree that it's significantly about high-trust relationships.

I manage a local dept of 8, within a larger local dept of +30, with experience ranging between 3 and 35 years, skewing toward younger (I'm one of the old ones). It's working well so far, partly attributable to maturity, and because we already have lots of non-face-to-face interaction with each other and clients. Several of the larger group are finding out that WFH isn't all it's cracked up to be, and would love to come back to the office, the sooner the better. I could go either way, though if I'm staying home, I really would like a larger dedicated office space -- I'm also hoping my neighbor flees.

Today's article proclaiming catastrophe for the city is from the WSJ, focusing on how families have fled the city and may decide to put down roots elsewhere. Several families were interviewed who have already made offers on places in the suburbs or as far as Rochester.

https://www.wsj.com/articles/escape-from-new-york-city-11587477601

"This whole thing is catastrophic and petrifying for families in urban areas. People want out of the city and now."

The articles talk about flight out of NYC, but the real issue is the enormous hole in the NYC and NYS budgets that will not be filled any time in the next few years. Tax revenues are going to be decimated. Unlike the Federal government, NYS can't simply print paper to fill in the gap.

There are only a few ways of dealing with this and resulting consequences, all of which are highly likely:
1. Elimination/scaling back of essential services: schools, police, sanitation, transportation, etc.
2. Increasing state/local income and property taxes
3. Concomitant increase in crime
4. Concomitant decline in quality of life in the city (salt in the wounds caused by the permanent closure of many restaurants and small businesses)
5. Further exodus from the city (compounded by the fact that the WFH trend. we can debate the magnitude, but not the direction)

NYS/NYC will not get a government bailout. Certainly not one that will make a difference.

The effect on residential and commercial real estate will be simply devastating. Anybody thinking about buying in NYC now anywhere near the vicinity of current prices is committing gross financial negligence.

The pollyannish real estate brokers will continue to scream "All Is Well!!!" a la Kevin Bacon, but these impacts should be obvious to any sentient creature.

https://www.wsj.com/articles/states-burn-through-cash-for-unemployment-payments-11587412810?mod=itp_wsj&ru=yahoo

"After the last recession, states eventually turned to the federal government as a backstop when their unemployment trust funds went broke. They later pursued different strategies to pay back the money, often by either raising employer taxes or cutting the duration of benefits.

States could repeat the same strategy of benefit cuts during the current downturn, perhaps on an expedited timeline. The recent surge in jobless claims far outpaced the increase during the 2007-09 recession."

yournamehere, do you think we could get the Federal Government to bail out the broker community just so we could stop hearing them and the pot-committed landlords / flippers screech "NYC real estate is fine!!!"

About the only intellectually honest one around here is 30

To yourname's point, the easiest answer will be to raise income tax on millionaires, possibly even retroactively to 1/1/20. "Millionaires" are, of course, anyone making more than $250K a year, which is the sort of wage required to buy anything bigger than a studio in Manhattan. These are the same millionaires who pay "mansion" tax on their 1BR condo where they live with their kid and spouse. More painfully, taxes and fees for just about everything else will go up, from parking tickets to the cost of a driver's license. it will be painful for real estate along the way. The suburbs (of Miami or Dallas) are looking better every day.

Pretty sure I've said this before, but now it seems close to a surety: in the late 1980s/early 1990s we saw many neighborhoods where small buildings got foreclosed on because they lost their retail tenant and in a lot of those buildings that can represent >50% of the income stream. Debrah Lee Charatan (Robert Durst's .... something) ran a firm which pretty much lived off those deals.
David Chang was quoted recently saying 90% of restaurants aren't reopening. Nothing is coming in and filling that void at those rent numbers. Those buildings aren't going to be paying their mortgages or Real Estate Taxes. Take a walk around your neighborhood, look at all the small buildings with retail space, run through the numbers in your head, and ask yourself what is likely to happen.

And don't forget that for every dollar in Real Estate Taxes that doesn't get paid by these buildings (and remember that those funds are largely collected through "pass alongs" to the retail tenants) a dollar in Real Estate Taxes needs to be collected from someone else.

Then remember the effects on prices of condos of taxes going up suddenly:
https://www.nytimes.com/2019/12/06/realestate/the-taxman-cometh-for-some-condos.html

The idea that 90% of restaurants won't reopen is bogus. I'll finance a half-dozen of them myself if that's the case, since people will be eating out again, and demand will be through the roof for whatever remains.

The French are about to panic because supposedly 40% of their bistrot etc won't reopen. That seems more reasonable for NY. Still a disaster, since it will be the best restaurants that die and the roaches live. And what's the point of paying huge rent or a huge price for a property in a neighborhood with nothing remaining but Duane Reade, a Gristedes, a Shake Shack, and a Chase branch? You might as well be in Newark.

NYC's fiscal situation was already a ticking time bomb due to its woefully underfunded pension obligations. Now note that of the 5 points yourname provided above, reducing these benefits wasn't even on the list. The one very small silver lining is that this crisis may finally force de Blasio to wake up and face reality because the massive hit to revenue will leave him with no other options.

George,
Have you actually taken a look at the numbers in terms of seat capacity reductions in restaurants if they want to reopen under anything which might become the new social distancing norm for space between tables/parties?

I don't often agree with 30s grim reaper like pontifications. But the restaurant business is tough, even with landlords let's say forgiving rent for a few months, the carry for insurance and leased equipment etc can be pretty steep. The David Chang's of the world may potentially have the backers to keep them afloat. But I really feel for the smaller spots, I wouldn't be surprised to see 75% of them close. Unless somehow everybody cooperates together, insurance companies leasing companies to cut a deal rather than letting these places go under. Christian who works with me, used to own Oliva in the East Village, his family's been in the food business for a while. The smaller chef-owned local establishments run into cash flow problems when they just have a bad week or two.

Keith
TBG

On the bright side, rats are eating each other because curbside food waste has been reduced considerably. : )

"Always look on the bright side of life"... Monty Python anyone?

New thread at
https://streeteasy.com/talk/discussion/45667-corona-2020

or continue to post here as you wish.

Keith,
"I'm not dead yet."
https://youtu.be/W4rR-OsTNCg

@30yrs - If we are going with the Holy Grail, I envision you more as the Black Knight than as the guy in the "bring out your dead" cart. https://www.youtube.com/watch?v=zKhEw7nD9C4

I've been doing consulting for bars and restaurants for a couple of decades (mostly the IE part of my OR&IE schooling, but you'll have to look up the old meaning of that because my alma mater changed it so I'm assuming most have). I've been arguing with restaurateurs for a very long time that they were "over kitchened". My meaning being that they were renting spaces where they needed to use way too high a percentage of the space for back of house. But with rents so high they were renting spaces which were too small to be the types of restaurants they wanted them to be because "that's all the money there is." But this is why the much larger spots in the 1980s were so much more profitable - much more of the space was used where the money was made.

The last place I remember being impressed by how far apart the tables were was Ponte's. Then in the same week I went to Aureole and was aghast that it was one of the top restaurants in NYC and I was sitting on the guy at the next table's lap.

With most restaurants already being "underseated" (take a look at how much rent is going towards each cover and you quickly realize why no one opens what I think of reasonably priced neighborhood spots anymore).

Well, now remove half to 2/3 of the seats of these places. HTF do they stay in business? Although I'm guessing this is going to further accelerate the already booming "ghost kitchen" business.

I take that back... It wasn't Ponte's it was Capsouto Freres around the corner.

I’ve always loved Knickerbockers in the village - an absolutely perfect neighborhood place , but lifted above . I really hope it survives this - it would be a great loss if it didn’t

Some restaurants and other small business owners often bankrupt their businesses every few years and open a new one elsewhere, to save on cost and max out profit. That is normal and will always happen.