New York City Ranks Below 18 Cities in Economic and Real Estate Prospects: Study

Steve Cuozzo

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by Steve Cuozzo

JPMorgan Chase is spending an estimated $3 billion to build a new headquarters skyscraper at 270 Park Avenue. But according to a senior analyst in the bank’s asset and wealth management division, companies should think twice before investing too much in New York City.

New York City trails 18 other US cities — including second-tier markets like Boston, Seattle and even modest Boise, Idaho — in a stunning “forensic analysis” of the cities’ economic and real estate prospects by Michael Cymbalist, the market’s chairman. and investment strategy for JPMorgan Asset and Wealth Management.

New York was bested only by Chicago, depressed Detroit, and empty-nest San Francisco in an overall ranking of post-Covid-19 conditions in cities — such as the strength of downtown recovery, office vacancy, household tax rates, out-migration, violent crime and municipal fiscal health.

Kimbalist, a New York native who has written his department’s Eye on the Market reports since 2005, commissioned the study at the request of an executive client.

He recommended that his clients approach New York “in the same way an asset manager might approach large stocks in a diversified portfolio… the risks run counter to an over-focus on companies or real estate entities.”

He cites Gotham City’s “unique advantages” as its overall size, business diversity, global financial dominance, total employment, and low serious crime rate compared to other cities (“which sometimes comes as a surprise”).

Despite these strengths, New York City “has struggled with a weak economic recovery since 2019, structural problems related to its business conditions and poor financial health.”

He specifically points out:

• The current use of mass transportation at 73% of 2019 levels is considered “unsustainable given the required capital and operating costs.”
• The 18% office vacancy rate is the highest since the early 1990s.
• “Office-to-residential conversions are unlikely to significantly reduce the stock of underutilized office space given the cost and complexity.”
• “Zoning restrictions are particularly onerous at a time when flexibility is of the utmost importance in a post-coronavirus world.”
• “The influx of refugees threatens to significantly weaken the city’s financial position” at a time when it needs to “significantly reinvest” in infrastructure and housing.

Asked whether the bank had any remorse about how much it was spending on its new headquarters in light of the Semblast findings, JPMorgan spokesman Michael Fusco said:

“New York City has been our home for more than 200 years and we contribute significantly to the local economy as one of the city’s largest employers. We are building for future generations of workers and making a long-term investment in New York.