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.”