As New York City closes its doors to its neighbors, Manhattan could be in danger of toppling from its pedestal as the world’s greatest city.
Governor Andrew Cuomo this week expanded his mandatory 14-day quarantine of people traveling to the state from 41 COVID-plagued states as Manhattan continued to hemorrhage both its residents and its workers.
The borough has been the slowest to return its workers by far, with fewer than 30 percent back at their desk, according to data location analysts, Unacast.
And latest reports show that while every borough, Connecticut and New Jersey are seeing apartment sale numbers slowly return to normal, Manhattan continues to lag.
This comes as the nation’s top doctor holds up The Big Apple as an example of how to beat coronavirus.
“We know that, when you do it properly, you bring down those cases. We have done it. We have done it in New York,” Dr Anthony Fauci said in an interview with television news show, PBS NewsHour.
“New York got hit worse than any place in the world. And they did it correctly by doing the things that you’re talking about.”
Indeed, on Thursday the state recorded just three COVID deaths – a huge turnaround from its peak of 800 a day. The state is now one of just nine in the U.S. that has the virus under control.
But as it tries to barricade itself from the rest of America where cases continue to surge, worries are growing about the overall impact the virus will have on the city’s future.
“If the number of commuters remain low and local businesses continue to struggle, it will for sure have a negative impact on real estate and property values as well,” said Thomas Walle, CEO of Unacast.
While it’s hard to get anyone to go on the record with actual figures, Unacast tracks people’s movements from their mobile phones and other devices.
Its technology confirms that mobility patterns are different across New York’s five boroughs of Manhattan, Brooklyn, Queens, the Bronx and Staten Island.
Walle, told Real Estate Weekly, “Manhattan shows the lowest return-to-work numbers, most likely because many office workers have been able to work remotely. Additionally, it is barely represented in the reopening census block groups.”
According to Walle, the hurt is being caused by a variety of factors, including demand for service, ability of area residents to supply those services, and local COVID rules.
Demand for service has been badly hurt by the exodus of Manhattan’s well-heeled to summer homes in the Hamptons, a tony enclave along the southeastern beaches of Long Island; the Hudson Valley a couple of hours drive upstate; and the New Jersey Shore, situated along the Garden State’s southeastern beach towns.
A report from the city’s biggest residential real estate brokerage, Douglas Elliman, shows that new signed contracts for homes in the Hamptons have more than doubled from the same time last year as “the market continued to benefit from the outbound migration from the city.”
The median price of a single-family home in the Hamptons reached $1.1 million in the second quarter, an increase of 25 percent over last year’s second quarter, according to Douglas Elliman. The average sale price was pushed to $2.1 million by the sale of multi-million dollar mansions.
But after bottoming out in April, new signed contracts for apartments in Manhattan continue to wallow in a COVID black hole that has hit uber luxury homes particularly hard.
According to the Douglas Elliman New Contracts report, the $20 million-plus new condo market has been completely obliterated, with no recorded sales since the pandemic began.
There have been five new condo contracts signed in the $10 to $19.99 million range – a 16.7 percent dip on the same time last year and the healthiest segment of the Manhattan market on paper.
Luxury developers have been quick to react, slashing prices as much as 53 percent on exclusive apartments.
Victor Group this week cut prices by over half on the last units at The Getty Residences in Chelsea in what it called “a proactive move” against the market.
Two years after selling the penthouse for a record-breaking $59 million, the developer has now priced the four full-floor homes in the building at 503 West 24th Street in the market sweet spot.
The biggest apartment, a four bedroom overlooking the High Line, has been reduced from $21 million to $13.8 million. The other three units start at $9.4 million.
“We hope this bold move sends a strong signal to the market that we have priced the residences to sell, and we are looking to transact,” said Ran Korolik, executive vice president and partner at Victor Group.
It was prolific luxury developer Extell which first grabbed the bull by the horns in May when it announced it was cutting prices by 20 percent at One Manhattan Square
Christina Medina, director of dales at One Manhattan Square, told REW this week that “many people are taking advantage and transacting,” since the price cut.
Public records show there has indeed been a slight uptick in business at the luxury building, with six apartments sold since May and 15 more now in contract.
But with dozens of new apartment buildings opening in the wake of the city’s so-called PAUSE, Jonathan Miller, president of Miller Samuel and creator of the Douglas Elliman report, said condos at every price range continue to be slow to sell and Manhattan has been unceremoniously usurped from the top of New York’s housing heap.
Sales have surged in Brooklyn and Long Island, Westchester County, Fairfield and Greenwich, CT, where single family and condo new signed contracts are in their second straight month of an upswing.
In Asbury Park – a working class Jersey Shore town made famous by its favorite son, Bruce Springsteen – developer iStar just reported the most expensive sale in the town’s history with a $5.9 million apartment closing at its Asbury Ocean Club.
“The NYC metro area is seeing a sharp uptick in demand – with the exception of the city itself,” said Miller. “The lack of a spring market due to the lockdown, record low mortgage rates and outbound migration from the city have fueled excess demand. While the city housing market is seeing an uptick in activity since reopening at the end of June, it has been slow to rebound.”
With fewer residents and workers, and despite a dramatic easing of COVID restrictions, those left living in Manhattan have few to whom they can sell their services.
Walle said that Unacast’s mobile tracking found that the neighborhoods with most people back at work are most often low-income areas hardest-hit by COVID-19 but where workers tend to live around where they work.
Conversely, the areas that have not returned as many workers have more commuters, more office buildings and fewer residents.
And businesses that reduced rather than closed their businesses during the early phases of the shutdown are benefiting from a much faster recovery than those that shut down completely.
If it is to get its people back – at least its workers – global property technology company, Equiem, said employers and building owners need to rebuild the trust of their tenants and workers.
Gabrielle McMillan, Equiem CEO, said: “The COVID-19 pandemic and subsequent lockdown period has accelerated the evolution of the office. More occupiers will work from home after lockdown ends, therefore owners need to be even more proactive in understanding their needs and delivering solutions to address them.
“They will need to rebuild trust with occupiers, reposition the office as a safe and productive environment, while being able to communicate with tenants who are in the office and at home.”
In a survey of 4,500 owners and occupiers in its US, UK, Ireland and Australian portfolio, Equiem found that 60 percent of occupiers won’t return to office until ‘it feels safe.”
Critical factors for them to return are information and communication on active in-building COVID cases, safety and cleaning procedures and lower office density.
According to Equiem, while only 22 percent worry that they will catch the virus by returning to work, they are unlikely to do so until they can be assured they can social distance in an the office that it is frequently cleaned and has improved air filtration systems.
Among Equiem’s clients, building occupancy in May remained extremely low; 72 percent of office buildings had less than 10 percent occupancy, while 17 percent reported occupancy between 10 to 20 percent.
“Manhattan is once again ground zero in terms of residents fleeing the city and leaving those who remain in fear,” said Adelaide Polsinelli, an investment sales broker with Compass, who blames the exodus on “poor leadership.”
She said, “Our city’s political leaders have turned the city upside down. By encouraging and praising criminal acts, and rendering police impotent, they have ushered in a city that is uncivilized and dangerous. The climate is anti- business, with an emphasis on hurting small business owners. The only silver lining is the hope that in less than 18 months, a more intelligent, mature and conservative regime is elected.
“Until then, the heart and soul of the city, not to mention these who bankroll all the necessary services, will not return.”
New York City Mayor Bill de Blasio has come under fire in recent months for series of legislative orders that have hurt small businesses in particular, cutting off vital rent payments to landlords and offering little in the way of aid. Small business revenues in New York City have fallen 31 percent and at least 2,800 businesses have closed permanently since the start of the pandemic.
He also cut over $1 billion in police funding to redirect money to build youth recreation centers and public housing.
The cuts came in the face of several days of public demonstrations against police brutality and racial discrimination sparked by the death earlier this year of George Floyd, a black American man killed during an arrest after allegedly passing a counterfeit $20 bill in Minneapolis.
This week, the Mayor announced he was authorizing checkpoints around the city to stop outsiders coming in. The city continues to ban gatherings of more than 50 people, enforce face coverings and social distancing and limit restaurants to outside dining only.
Meanwhile, Governor Cuomo’s handling of the crisis has earned him election as chairman of the National Governors Association by his peers across the United States. He’s also been called upon to lend his expertise to states such as Florida, where new coronavirus infections have now surpassed New York at the peak of its outbreak.
Today (Thursday) the Governor called on Washington to deliver $30 billion in economic aid to New York State warning that, without the money, “we’re going to have to take very dramatic action and these dramatic actions, I believe, will be counterproductive.
“This economy has taken a terrible beating. It’s not going to come back spontaneously in my opinion. It’s going to take significant work to make it comeback and that’s going to require a partnership between the federal and state governments all across this country.”
