As the dust of the pandemic lockdown settles and restrictions gradually ease, the contours of the ruin caused in New York City are emerging. Restaurants bankrupted, culture paralyzed, and gun crime harkening back to the mid-1990s. The rich and middle-class are leaving in droves. The poor are stuck. A homelessness crisis looms on the horizon. Those who stay cling to rickety hopes—perhaps the vaccine will come soon, perhaps the city and state bring leadership. Instead, politicians are talking more taxes.
The Epoch Times spoke to more than a dozen professionals in real estate, mortgage, relocation, housing aid, and parenting aid to map the situation in the city and sketch out a prognosis of what’s to come.
Not all spoke of doom. And for some, there is a silver lining to the crisis. Investors with deep pockets, for instance, can get their hands on pricey city properties at a discount, betting on a recovery, even if years away.
Much of the pain, on the other hand, hasn’t yet come to bear. Nobody knows what the “new normal” is going to look like. Many say the city has changed for good.
Shutting Down New York City
The city had persistent problems even before the lockdowns. The exorbitant cost of living was pushing residents away, but the population was still growing.
As the number of COVID-19 infections and deaths escalated in March, the lockdown orders forced the “city that never sleeps” into silence.
Now, Manhattan is no longer a ghost town. People are walking the streets again and many businesses have reopened. Still, the bustle has been reduced to a shuffle.
Some of the dystopian features persist. In some office elevators, only two people are allowed in at a time. People are required to wear masks, stand in opposite corners, face the wall, and not talk to each other—a depressing picture.
Street corner bodegas have pulled through, but have hiked prices amid feeble pedestrian traffic. People keep to themselves even more than they used to.
And then there’s the “exodus.”
An early May survey by PropertyNest, a real estate listing site, indicated that nearly a million people were considering moving out of the city. More than 400,000 have left, at least temporarily, based on cellphone location data analyzed by The New York Times. Moving companies are so busy they have to rent U-haul trucks or even turn people away, The New York Post reported.
The real extent of the out-migration is still unknown, but the phenomenon is undeniable and ongoing.
United Van Lines, America’s largest long-distance mover, saw the interest in leaving New York City nearly double over the May–July period, compared to the same period in 2019.
Get A Rate, a New Jersey mortgage lender, saw applications from people moving out of NYC more than triple year-to-year in the past three months or so.
Suburban Jungle, which helps urban families find suitable suburban locations to move to, saw a nearly five-fold increase in the use of its free service year-over-year in recent months.
The company’s founder, Alison Bernstein, observed three types of customers pre-COVID-19. One is a family that definitely wants to leave the city, but isn’t sure when. Another is a family that ponders moving out, but is undecided—the “wait-see-not-sure” category. The last one is a “hardcore urbanite” family that checks out the suburbs, but it only solidifies its affinity for the city.
“Now, what we’re seeing—and this is insane—is everybody’s doing it,” she told The Epoch Times. “Everybody’s leaving.”
The situation is different for “anti-nesters,” recent college graduates, and others who don’t have to worry about raising children, she said.
For families with young children, however, the cost-benefit equation has shifted away from the city.
“People are like: ‘My kids are young now. I don’t have 2 to 10 years to wait for this to bounce back,’” she said.
Instead, the downsides of the city stand out: the violence, the grime, the noise.
The pandemic has also made many people conclude “it’s not healthy to live where everybody is on top of each other,” she said.
What City Life?
Many of those who leave still carry strong sentiment for the Big Apple, Bernstein observed. They just need to deal with the immediate problems.
“They’re not being negative, they’re just being practical,” she said.
The city’s appeal stands mainly on five pillars: restaurants, theaters, museums, short commutes, and safety. All of those are now crumbling.
With the summer concluding, outdoor dining will soon lose its appeal, and the city still has no plan for reopening indoor dining. Moreover, many of the popular restaurants have already closed, and nobody knows when they will reopen or be replaced.
Broadway will be allowed to open for the fall season, but only at 25 percent capacity, as it now stands. That’s nowhere near what the industry needs for survival, not to mention the disheartening effect of playing to largely empty venues.
Museums have been reopening at a reduced capacity, but are not as much an attraction for residents of the city as for tourists, who made up two-thirds of visitors in 2018. It’s not clear how much they could sway people from leaving.
Commuting remains a concern, but the well-paid corporate office jobs that formed a major draw for the city have largely gone remote. Companies are still gauging the effect on productivity—there’s been no fire sale on Manhattan office space—but, as Bernstein noted, remote work has proved itself viable enough to stay for good.
Moreover, “the talent wants the option at least for the foreseeable future,” said John Boyd, head of a New Jersey location consultancy that works with Fortune 500 companies.
Many companies were exploring the remote model prior to COVID-19, and the pandemic forced them to make it work even if they weren’t eager to try, he said.
The pandemic “accelerated things by 10 years,” Andrew Barrocas, chief executive of MNS Real Estate NYC, told The Epoch Times.
Companies will embrace a hybrid model, where at least some employees work remotely, predicted California-based Graceada Partners commercial real estate firm in a recent report.
Ryan Swehla, founding partner at Graceada, expects it’ll take one to three years for companies to figure out the right mix.
“The days of everyone coming in five days a week to the office are over,” he told The Epoch Times.
It appears companies in the creative business that rely on team atmosphere, brainstorming, and close collaboration will still prefer the office environment, he said. But a lot of the administrative and repetitive office jobs, such as those that had already trended toward outsourcing, will remain remote.
Whether that translates into a sellout of office space is still unclear. Swehla expects businesses to increase space per employee, which may offset at least some of the remote-related downsizing. That will take six to nine months to materialize as commercial leases roll over.
‘Space Is Like Gold’
Remote options, whatever they may look like in the end, have changed the commuter equation.
Before COVID-19, even those moving out of the city were looking at smaller houses close to the town center and with a reasonable commute.
“Now that’s completely flip-flopped,” Bernstein said. “People are looking for larger homes further out and they’re saying, ‘Look, even if my work day comes back … it’s never going to be five days.’”
Apartments in densely populated Hoboken and Jersey City across the Hudson River from Manhattan had been selling like hot cakes in early 2020. Now they linger on the market, said Kyle Klaus, broker at Prestige Properties in New Jersey.
In contrast, houses in suburbs such as Montclair, New Jersey, more than an hourlong train ride to Manhattan, can now easily sell for $100,000 over asking price, he told The Epoch Times.
“Outdoor space is like gold right now,” he said.
Even people in the suburbs are picking up now and moving further away from the city, where they can stretch their mortgage dollar further.
“There’s a push in every direction for more land, for more value and it’s just going out west, basically, from Manhattan,” Klaus said.
Part of it is because of interest rates as low as 2 percent on 30-year mortgages.
“It’s never been cheaper to borrow money,” said Michael Sema, Get A Rate’s founder and chief executive.
The market is driven by first-time buyers aged 30 to 45 with median income a bit below $90,000, he told The Epoch Times. That indicates it isn’t just the rich leaving the city. The middle class is uprooting, too.
New listings in suburban New Jersey get 20 offers within 24 hours, he said.
Upstate New York is a similar story, with “bidding wars” on houses erupting, according to Ruth Shin, founder and chief executive of PropertyNest.
Many New Yorkers are going even further, moving to the south or the West Coast.
Almost 30 percent of interstate United Van Lines moves from New York City went to Florida and California over the period from March to August, according to Eily Cummings, director of Corporate Communications at UniGroup, which owns United Van Lines.
Another 16 percent went to Texas and North Carolina, she told The Epoch Times via email.
Whole companies are relocating, Boyd said, after doing their math on how much they can save on office space and other costs.
“If you’re an entrepreneur or a remote worker, you now have options to work in a state that has lower taxes, that doesn’t have this type of social unrest,” he said.
New York City’s reputation for being among the safest large cities of America, which took decades to build, has been wiped out in mere months amid protests and riots as well as a series of progressive reforms that have virtually done away with proactive policing.
From June until Aug. 23, more than 800 people were shot, compared to less than 300 over the same period last year. Murder is up more than 50 percent in the same period NYPD data shows.
The violence has mostly concentrated in the historically most-notorious neighborhoods in the Bronx and northern Brooklyn, but the perception of danger lays on the city. The government’s decision to turn Upper West Side hotels into homeless shelters didn’t help either, several New York real estate agents indicated.
Safety concerns are in fact the major factor driving people out of the city, Boyd has heard from his clients. Others have identified the COVID-19 fallout as primary.
Some of the realtors expressed optimism about New York’s property market. Parking millions of dollars in a city property is generally a long-term investment, and such buyers are more willing to bet on an eventual recovery.
They are “more the cowboys—they’ll roll the dice and they’re confident,” Vickey Barron, realtor at Compass, told The Epoch Times.
“None of these people think it’s going to bounce back in a year or even two years. It may take five years. But they’re not flippers. They’re not buying to come in and flip,” she said.
Indeed, it’s now a golden opportunity for buyers beyond the $3 million price tag, noted Michael Franco, associate broker at Compass. In new construction, discounts up to 40 percent have been reported, but those are quickly disappearing.
In other parts of the market, prices haven’t dropped much to begin with, or have even increased.
“It’s rare to have a fire sale” on prime New York City property, Franco told The Epoch Times.
Brooklyn townhouses, for example, which often feature a small backyard and a semi-suburban feel, have hiked in popularity.
“Outdoor space is across the board of interest to people,” Barron said.
The New York rental market, however, has been decimated by the lockdowns. Vacancies in Manhattan have doubled since last year and landlords are scrambling to fill them, offering no-fee leases and even several months rent-free. Manhattan now has 14 months’ worth of rentals available, compared to the usual six to seven months, Klaus said.
Brooklyn fares better, with only a small decline in rent per square foot, according to a July report compiled by Miller Samuel Real Estate (pdf) for The Elliman Report.
The full extent of damage to the rental market is mostly hidden for now since the city has frozen evictions. But something will have to give. City unemployment rate climbed to nearly 20 percent in July with nearly a fifth of jobs wiped out, year-to-year. Many of the jobless have neither the money to pay rent, nor to pick up and move.
Landlords are generally understanding and the eviction courts received guidance that tenants need to get a payment plan offer before getting kicked out, according to Barron.
But many of the city landlords don’t have the cash to absorb the losses, especially given that “most of the properties are leveraged to the hilt,” said James Ryan, founder of anti-homelessness nonprofit Time for Homes.
Squeezed between loan payments and property taxes, many landlords will face bankruptcy. If they try to evict the tenants instead, the city may face a homelessness crisis on a massive scale, he said, predicting tenants will stay put and wait for overburdened courts to eventually evict them.
“We have quite a number of evictions coming up unless the city and state does something about it,” Shin said.
Some tenants are already trying to avoid that situation, looking for a cheaper place to rent. But that will only push the prices at the low end of the market up, pricing the poor further out.
The government could simply avoid the whole game of chairs and pay the missed rent bills. However, the city faces more than an $8 billion budget shortfall, while the state is looking at a more than $14 billion budget hole.
Everybody appears to agree that the city can and will come back. But it depends heavily on several factors.
“We’re all waiting for that vaccine so we can bounce back sooner than later,” Barron said. Not everybody is confident on that front, though. “There are plenty expecting another lockdown.”
Moreover, the city needs to quell the crime.
“Without safety, there is no economic development,” Boyd said.
Businesses need to feel welcome and not regulated into the ground. Property taxes may need to be deferred to avoid landlord bankruptcy and homeless crisis.
“It can come back but it will take much more than a Jerry Seinfeld op-ed, and it will take much more than … marketing gimmicks to bring back Manhattan,” he said. “It’s going to take real leadership.”
There’s no indication of such action from Mayor Bill de Blasio. Most recently, he proposed further restrictions on police. Gov. Andrew Cuomo recently resorted to promising rich New Yorkers he’ll cook them dinner if they return to the city. Yet he offered no policy that would instill the confidence in them to do so.
Instead, Albany ponders a slew of new taxes, including a pied-a-terre tax that would hammer exactly the part of the property market that remains attractive. Several agents strongly advised against it.
The exodus of city dwellers isn’t limited to New York City. Many in San Francisco, Los Angeles, Washington, Chicago, and Seattle are looking for an exit, too, according to home search data from Redfin.
The most popular destinations are Las Vegas, Nevada; Atlanta, Georgia; Phoenix, Arizona; Sacramento, California; and Austin and Dallas, Texas.
In some regards, the market is now behaving in the opposite way of what was expected, Swehla noted.
It’s the major cities that usually bounce back first in a crisis, but now, “it’s literally exactly the opposite” with secondary cities taking the lead, he said.
“Nobody would have anticipated how that would have played out.”