By Rob Schuham, co-founder of Undercurrent
For 13 years I have had a home on and off (now on) in NYC and for 15 years prior I practically lived in Gotham for business reasons. I’ve done a fair bit of thinking on how the city will move through this crisis.
I’m deeply concerned. But NYC is resilient. Regardless, it’s going to be a really hard slog forward. Here’s a top line guess of where I see things going, the ugly, the bad, and then the good:
First, the painful stuff:
– Tragically, 6,000–10,000 New Yorkers do not survive the coronavirus based on a conservative national projection of 200,000–240,000 deaths nationwide. Horrible. Top of that range more likely as frontline health workers, police etc. are increasingly getting sick. In fact 5,600 police officers (15%) are sick currently in NYC. It’s a crazy number.
– We are already in a recession. It gets bad and it lasts a few years. NYC is somewhat disproportionately hit given it’s a dense city and agoraphobia-driven behavior change might alter inexorably how some view city life. The current stimulus is woefully inadequate on an individualized basis in an expensive city like NYC, especially in Manhattan and Brooklyn. Without a job and the clock running out on COBRA healthcare coverage, choices become stark for those laid off.
– Stock prices gyrate and bump around new lows. 401K’s are rocked. Heuristics of fund managers do not prove out in this black swan of a black swan event. For example, China, to no one’s surprise, has been under reporting Coronavirus cases and deaths. Only 22% of manufacturers polled recently are actually back operating, vs. China’s “officially reported” 90% in the Wuhan and surrounding regions. The financial sectors are hit hard. High flying, high spending Wall Street’ers, Hedge Funders, Bankers and others come closer down to earth. Bonuses drop. The inflow of international money into NYC slows to a trickle. All of this negatively impacts various sectors of the city.
– 20–25% of NYC restaurants and retail close permanently. More drag along for awhile and may or may not make it. So maybe 30–40% don’t make it in a worst case scenario? I hope it’s way more towards the 20% number, as even this level is painful (1 in 5 stores and restaurants). The National Restaurant Assoc for example asked for $145B across the country, yet received only $35B from the stimulus package. Thus many restaurants simply won’t survive in NYC, even with rent holidays.
– Large and midsize companies continue to lay people off. Rents drop as do real estate prices overall. Rent moratorium movements (as in tenants stop paying rent as of today, April 1) and a new eviction moratorium combine to protect renters for the next 90 days, however the Fall sees a smallish exodus out of the city, unless the government steps in with more relief funds and/or unemployment benefits increase.
– Small landlords are adversely affected. Some default. Rental properties drop in value as banks make decisions to either hold or unload distressed assets. City tax base also impacted as landlords simply can’t pay property taxes. Nor utility bills.
– Larger developers and landlords are able to withstand down-cycles, however many are highly leveraged. Thus, there will be more consolidation in both commercial and residential, as tenants adjust (and negotiate) for downsizing due to layoffs and new ways of working.
– Large Brick & Mortar retailers are doing their best to furlough as opposed to laying off and firing, however this can’t sustain. Retail mix and composition may shift significantly across the city. Hard to tell which neighborhoods fair best at this point. Some large brands in the most stable shopping districts have simply stopped paying their rent. Further, shifting preferences to Amazon (if they can hire enough workers, mitigate contagion in their distribution centers, and stave off walkouts) and the like further stress large retailers.
– A mental health crisis begins before the Summer given months of quarantining and rising unemployment. Depression, anxiety, PTSD and suicide rise while other chronic emotional conditions are exacerbated. Violence, down currently, increases over time. Outer boroughs impacted harder as jobs thin out, savings are depleted, subsistence-living frays nerves and dense, multigenerational, multi-tenant living conditions start to factor in. PTSD from all this continues for years.
– 2,200 transit workers are currently out sick, straining parts of the subway, rail and bus system. Offsetting this is that ridership is down 90%. Result is that MTA is losing $125M/wk. MTA received $4B from government to cover some expenses and help make bond payments. Bonds downgraded, but they’ll likely continue to be propped up.
OK, the above all sucks. And there are other cascading effects not identified including other sectors and services, as well as the worst elements of the stimulus package. But what could go right?
– Direct to consumer delivery businesses spiking, Amazon, Fresh Direct, Sakara etc. The crazy electric bike delivery guys who I almost get run over by daily, double and triple.
– Amazon, FedEx, UPS and gig workers in delivery and transportation start to experience safer working conditions as newer, stricter protocols are put in place.
– Public transportation habits adjust for better or for worse as people are both working virtually, while also fearing being packed together. Warmer weather will put more people on surface streets on Scooters, Bicycles and Citibikes. Even more walking will happen. Uber and Lyft contract for awhile with infection fears and recessionary cost-cutting, but perhaps rebound slightly. Essentially people self-distribute over all modes of underground, surface and water transportation to optimize for lowest density.
– The virus gets “normalized” by end of this year IF we successfully flatten the curve. Meaning the overall global death rate comes in lower as treatments and protocols become more effective and we get a more accurate handle on non-tested people who made it through.
– We get an actual vaccine mid to late 2021 further normalizing the virus and it becomes contextualized like influenza over time. This is provided it doesn’t radically mutate. And as this normalizes, better hygiene practices and habits normalize as well. Not just for people but business too. Handshaking all but disappears. Elbow bumping and namaste bowing goes up. Hugs mercifully start to make a comeback, but cheeks are distanced, and hands awkwardly turned away from touching the other person’s back. Kind of funny to think about.
– NYC (which was already experiencing a softening real estate market before this happened), grinds forward. Over time, the fact that it’s the global center of finance and media is inescapable. Tech and fashion are inescapable as well. The largest players in these industries push forward. There is consolidation, but consolidation breeds challengers and entrepreneurs….we know this story.
– Humans are resilient, especially New Yorkers, and have selective memory. We are also social beings. Typically small NYC kitchens aren’t exactly growing larger, so between the two, we will start seeing more and more people in restaurants again.
– Tourism will slowly come back. It will be critical for Broadway (and off-Broadway theater) to re-open, along with other high-density cultural attractions. This could happen towards the end of the calendar year. But if we have a second Covid wave (similar to what’s happening in Asia right now) this may get pushed to 2021. But the show must go on and there will be increasingly creative approaches to theater, concerts and other entertainment if the virus is still circulating at high levels. Either digitally or in lower density live settings.
– Artists and creators. Some of the best in the world reside and work throughout the boroughs. They will be instrumental in the (fast) resurrection of the vibrancy and pulse of the city. The high stakes art world will certainly take a hit as prices rise and fall with the economy. The beating heart and soul of what/who NYC is artistically rooted in will likely continue all avenues and mediums of expression regardless. Maybe even more so. I’m hoping that the biggest art patrons turn some of their support towards the smaller, more diverse art communities throughout the city to help see them through.
– New Yorkers also like supporting independent/small business. Government, Amex etc push hard on this in the recovery. It bounces back eventually, but will be slow going.
– Maybe Bloomberg writes a huge check to his hometown to match NYC’s portion of the next multi-trillion dollar stimulus tranche that will undoubtedly have to happen? (Wishful thinking)
– NYC as a large community is strong. 1987, AIDS/HIV, The dot-com crash, 9/11, The 2008 Recession and a Hurricane notwithstanding. This is a resilient group of people that don’t fold easily. Civic pride will go a long way. New York will not easily surrender it’s status as the one of the best cities, if not the best city, in the world. Perhaps the “I Love NY” campaign makes a comeback?
The city, and the country, will be different for sure. But NYC is iconic for a damn good reason.
March 17, 2020