This past Tuesday, news of a shocking real estate deal came to light. According to The Real Deal, a publication that focuses on commercial real estate, Brookfield Properties, the owner of a block-long retail corridor on 530 Fifth Avenue, a prime New York City location, is in contract to sell the property for a whopping 36 percent less than the $295 million that it had spent on it in 2014. The trade, in which the property will transfer to a partnership between Aurora Capital and hedge funder Edmond M. Safra for $190 million, is said to be the biggest real estate deal since the beginning of the pandemic, and it does not bode well for the future of New York City.
Brookfield is not alone in taking huge losses in commercial real estate in the city. The week before the Brookfield deal, Vornado Realty Trust sold off a number of struggling retail properties in Manhattan for $184.5 million, far below the $366 million that the five properties were purchased for between 2004 and 2006. And Vornado and Brookfield are the lucky ones; other companies that have large investments in retail space now face bankruptcy, with the majority of their assets being handed over to their creditors. All this suggests that investors have lost faith in the post-Covid comeback for which New Yorkers have been waiting with bated breath.
The deals are representative of the epochal shift underway in America’s most iconic city. The steep drop in value suggests not only that investors are rethinking their investments but also that they have accepted the premise that the pandemic may have changed the role of cities altogether. New York City, the financial and business capital of the world, and until very recently a hub for tourists, may well be the canary in the coal mine that predicts a decline in the very idea of the megacity. With the Delta virus having halted return-to-office plans, the office tower vacancy rate in Manhattan is stuck at 20 percent. This means that the looming behemoths that made up the city’s iconic skyline are now a silent and sulking lot.
When workers do not come into a city, a city can wither; and an examination of slow recovery of retail districts that are close to certain subway stations frequented by New York city commuters prove this. This is simply because the vast economic machinery of the city requires a constant influx of cash. Office workers, now toiling at home, used to provide that. There were lunch-break or after-work shopping sprees to nearby retailers, there were lunches at cafes and restaurants, there are the million other things that are consumed in the course of the day. Students and creatives may still be thronging to the city, but it is the absent army of white-collar office workers whose taxes and transactions keep the city running. The urban cycle of constant production relies on all the people who earn money while being away from home and then spend it to make themselves feel better, feel more successful, more like a somebody rather than a nobody. New York has been all about this equation.
Declining real estate values suggest that investors are rethinking their investments and may have accepted the premise that the pandemic has changed the role of cities altogether.
No one could have imagined that New York City’s decline would be so sudden. One recent ray of light was the re-opening of Broadway last week. Emotional scenes were reported as the shows began, with actors given standing ovations when they first appeared on stage. But Broadway, like so many places, remains on edge: intermissions and autograph-seeking are curtailed, and proof of vaccination is often required. Many shows themselves are also condensed to reduce the time theater-goers spend inside a packed auditorium. And many of the estimated 97,000 people employed by Broadway still attend rehearsals wearing masks. But for all the mirth, even those who are brave enough to attend the shows will recognize the shadow of the pandemic over everything. The lure of Broadway used to be in its ability to transport a person into a story, a carefree escape into song and dance. But nothing is carefree anymore and tourists may not see the point of flying into New York to attend a show laden with the same worries that afflict everything else.
What was effortless and escapist has suddenly been deemed an exacting chore. Walking down Fifth Avenue on a weekday afternoon, one got jostled and pushed by a mad mix of office employees rushing to meetings, tourists looking up in awe at the massive buildings, customers whizzing into fancy stores. Mid-town Manhattan has a funereal feel now, its boarded-up storefronts and For Lease signs signaling the end of something that was colossal and vibrant.
New Yorkers may not recognize such decay as an ominous portent, but they are familiar to those who have spent any time at all in the Rust Belt. What deindustrialization did to the American Midwest, killing scores of small cities, the pandemic is now doing to America’s largest city. The boarded-up downtowns, the abandoned stately mansions and the general air of resignation is still palpable in the near abandoned Rust Belt towns of the Midwest and it still breaks one’s heart. Those from the Midwest, who left towns just like this for vibrant and lively New York City, may recognize the signs of the end. Just as their parents and grandparents believed that the factories would come back, the town would wake up, the jobs would return, New Yorkers now await the return of office workers who have already acclimated to a world where remote is the only route to safety.
New York will never really die. It is simply too big to fail, too connected to America’s role as the center of the world’s finance. It will, however, shrink, becoming less prosperous and less populous. There is some hope in these changes, too; after all, the giant office towers consuming vast quantities of energy to heat and cool endless cubicles will be better off used in some other, less miserable way. The excision of the dreaded commute, two hours each way for some former office workers, can shrink the carbon footprint from its pre-pandemic size. Climate change is here to stay but Covid-19 may have provided an opportunity for less consumption, which is always a good thing for the planet’s increasingly tenuous future.
In its own evaluation of how New York would fare back in May, the New York Times expressed similar concerns, noting that companies like Goldman Sachs and JetBlue (and hence the kind of taxpayers New York City needs) were reportedly eyeing office space in low-tax Florida—not a good sign. Taken together, the top one percent of earners in the city—just 38,700 people—represented 40 percent of its tax base in 2018. If all of them leave, New York will decline even further. The city services such as garbage collection, for instance, will lack funds and falter, leaving the city struggling to manage itself as it runs out of money.
In the past, I had always wished to be a witness to something momentous and historic. In this pandemic present, I regret this wish. Transformational moments like the one we are living through come with so much tragedy and a strange sort of bafflement at how the world can change with such ruthless alacrity. Never ever could I have imagined New York City as sitting empty, the millions of cubicles suddenly redundant, the multi-story fast fashion megastores boarded up and abandoned. Friends who swore they would never leave New York City have packed up, one moving to North Carolina, another to Florida, and a third to Chicago. Some of the girls about town, whose mainstay was to circulate through the city’s literary and artistic circles, have stayed, but being largely unseen in a city where they arrived precisely to be seen seems to be wearing on them. Posting cat photos and freshly baked bread, after all, can only carry things so far. Their influencer lives demand content production and are now lacking just that, the limits of the camera angles in their studio apartments grating and obvious. There was a time not long ago when this lot wore the discomforts of the crowded city with pride, the postage size apartments, the stinky subways, the absurd difficulty in doing ordinary things were all part of the New York “experience.” Now that experience is not much of an experience anymore.
It is the loss of that state of mind, the one that insisted that hardship was always worth it if it meant getting to live in New York City, which is the biggest casualty of this decline. Without an office to go to, the apartments really only designed to be sleep stations seem even smaller, claustrophobic and unbearable. No one from the suburbs, it appears, even wants to visit Midtown. With so much money tied up in the iconic skyscrapers and their values plummeting, the future promises further disaster. Optimists argue, as they will, that the moment can be harnessed, a new New York created that is more equitable, friendlier to community creation, instead of simply post-modern alienation. They could be right, but for a city that built its brand by being the “somewhere” where people wanted to be, the rise and popularity of a world where one can be “anywhere” is threatening.