Steve Cuozzo
Business
Property check
Published October 22, 2023, 1:45 p.m. ET
JPMorgan Chase is spending an estimated $3 billion to build a new headquarters skyscraper at 270 Park Ave. to build. But companies should think twice about investing too much in New York City, according to a top analyst in the bank’s wealth management division.
In a bombshell “forensic analysis” of the cities’ economic and real estate prospects by Market Chairman Michael Cembalest, the Big Apple trails 18 other U.S. cities – including second-tier markets like Boston, Seattle and even humble Boise, Idaho JPMorgan Asset & Wealth Management.
New York topped an overall ranking of cities’ post-COVID-19 conditions – such as strength of downtown recovery, office vacancies, household tax rates, out-migration, etc. Violent crime and municipal financial health.
Cembalest — a New York native who has written his department’s Eye on the Market reports since 2005 — conducted the study on behalf of a client CEO.
He recommended his clients treat New York “as a money manager would treat a mega-cap stock in a diversified portfolio…the risks militate against too much concentration for corporations or real estate companies.”
According to the Getty Images study, New York’s office vacancy rate is 18%, the highest since the early 1990s
He cites Gotham’s “unique advantages” due to its overall size, diversification of the business sector, global financial sector dominance, overall employment, and lower rates of serious crime than other cities (“which sometimes comes as a surprise”).
Despite these strengths, New York City “has been impacted by a weak economic recovery since 2019, structural issues related to its business conditions and a poor fiscal position.”
In particular he states:
- Current public transit usage is at 73% of 2019 levels and is “unsustainable given the capital and operating costs required.”
- At 18%, the office vacancy rate is the highest since the early 1990s.
- Converting office to residential buildings “is unlikely to significantly reduce the stock of unused office space given the cost and complexity.”
- “Building restrictions are particularly burdensome at a time when flexibility is paramount in a post-COVID world.”
- “The influx of asylum seekers threatens to significantly worsen the city’s financial situation,” at a time when it needs to “reinvest” significantly in infrastructure and housing.
The Big Apple ranks behind 18 other U.S. cities, including Boise, Idaho. The Washington Post via Getty Images
Asked whether the bank had any regrets about how much it spent on its new headquarters in light of Cembalest’s findings, JPMorgan spokesman Michael Fusco said:
“New York City has been our home for more than 200 years, and as one of the city’s largest employers, we make a significant contribution to the local economy. We are building for future generations of workers and making a long-term investment in New York.”
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