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Home/Articles/Economy/Post-COVID, There’s No Place Like New York

Post-COVID, There’s No Place Like New York

New York has had its share of stumbles. This time, it's different---the need to be here is gone.

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, an art district, 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 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, 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 poured money into the city. In 1792 brokers created the New York Stock Exchange. Over two centuries the goods bought and sold changed, but the place to do the job had to be New York.

So comes 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, so 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 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.

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, media, advertising, songwriting, entertainment, insurance, banking, and 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 one sharp September 11, 2001 morning. 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, it’s more a cosmetic backdrop than a 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 has been negative. By 2020 NYC’s “Financial District” was well over 80 percent residential, with the last of the great 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 showed 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. They could be in a cheaper, warmer, safer location, with better schools, better governance, and 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, which once leased 23 floors. The major 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 billions 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 statescenario.

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 (all 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!

Peter Van Buren is the author of We Meant Well: How I Helped Lose the Battle for the Hearts and Minds of the Iraqi People,Hooper’s War: A Novel of WWII Japan, and Ghosts of Tom Joad: A Story of the 99 Percent.

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