Founder and CEO of The Raisner Group (formerly Proteus Capital Management), a private real estate investment firm in New York City.
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The pandemic has accelerated all trends. That applies to Amazon’s home deliveries becoming crucial, Zoom’s services becoming part of everyday life, or work from home making clothing brands like Lululemon evermore popular.
This applies to real estate trends as well. Despite a mass exodus from cities to the suburbs all over the nation –which will eventually reverse — some neighborhoods in cities have fared much better than others since Covid-19 hit the United States in March.
The virus hit dense, live cities very harshly — with New York City thus far being the epicenter of the crisis. The Big Apple went through a very long and drastic shutdown. Only in early September did gyms reopen after a sixth-month closure. Restaurants are limited to just 25% seating capacity indoors since the end of September.
When the city began allowing businesses to reopen in June, it was a surprise to see many remained closed. If they had not already gone under due to lack of activity, their customer base of local inhabitants had mostly left. There was often no point in reopening. Nowhere as much as in Manhattan did this phenomenon occur, given the well-traveled and high-income population of the island.
Brooklyn has been hit hard too. Nevertheless, it retained more of its population — and businesses — for several reasons. Firstly, more of its 2.5 million inhabitants are middle-class individuals with deep roots in the borough, such as families, friends, local habits and networks. Manhattan has historically been more transient. Because of this, fewer businesses closed their doors, and Brooklyn stayed more livable. Indeed, New York’s outer boroughs are back (paywall) to pre-pandemic foot traffic.
Secondly, Brooklyn’s urban landscape encouraged its success and is better suited for life under a pandemic. Since it was historically built for families to live in brownstone buildings and townhouses, the borough features significantly larger and more affordable apartment units than Manhattan and other downtowns across America. Since Brooklyn started upgrading properties two decades ago, the area features a large amount of newly-renovated apartment buildings with full amenities. These often feature private outdoor spaces, rooftop decks, backyards and for some, stunning city skyline views from the waterfront. Besides, Brooklyn’s appeal lies in its numerous parks and neighborhood feel. Indeed, the homeowner market has stayed (paywall) healthy in Brooklyn, keeping the community-building momentum up. In some sense, Brooklyn was pandemic ready.
The aforementioned, which encouraged the success of Brooklyn, helped ensure its strength under Covid-19. Home sales (paywall) have actually been booming, and pricing isn’t down from pre-Covid-19. As every crisis is an opportunity to progress, Manhattan will likely catch up to the Brooklyn standards. Landlords on the island of Manhattan, more often than not, did not renovate their portfolios to the same extent as those across the river — who were forced to go above and beyond in order to gain a share of the market. Therefore, the rebirth of Manhattan might contain one of the significant investment trends of the future.
Despite the national headlines about the death of New York, there are signs of deep commitments to the city by some of the best brains, most forward-looking minds and deepest pockets in the world. In August, despite being vocal about letting employees work from home forever, Facebook signed an immense lease in midtown Manhattan for 730,000 square feet. Amazon, for its part, invested $1.15 billion in March to purchase the former Lord & Taylor building on Fifth Avenue and plans to create 2,000 jobs in the space. Landmark One Vanderbilt, the tallest tower of Midtown, has just opened, and is reportedly 70% leased. Office life didn’t die in March, and it certainly hasn’t after news like this.
In Brooklyn, Steiner Studios announced last month a 500,000 square-foot movie production facility in Sunset Park. For context, last year Netflix announced a production facility in the neighborhood of Bushwick. Post-pandemic, Brooklyn can become both the Hollywood of the East — and of the digital age. The world of high finance is also betting on Brooklyn with legendary Wall Street private equity firm KKR proceeding with one of the largest real estate purchases of the summer last month: a contract to purchase 1,275 apartments over multiple buildings for $860 million.
The coronavirus crisis has led to an enormous reset for the Big Apple. As of now, the most exciting city in the world is on sale. Apartment rents have gone down significantly, offices have become much cheaper for new companies, and many stores like beloved staple Century 21 are auctioning off inventories. My prediction is that soon, word will spread that New York is a bargain. Broadway will reopen, tourists will come back, masses of eager newcomers will move in along with companies and retailers, and we will have a brand new town. What’s more exciting than an enormous revival of New York, with brand-new-everything on a once-in-a-lifetime scale?
I also believe it may have started already. Park Avenue is still mostly empty and a sad sight. However, six months into an arguably more crushing blow than 9/11 and the 2008 financial crisis combined, Soho is beginning to feel back to normal this fall — with lines outside of pretty much every store’s doors on weekends.
When looking in-depth at the business activity data, the bounce back of New York is already written on the wall. As of today, NYC is arguably one of the safest large cities in the country, with the virus is no longer wreaking the havoc it did earlier in 2020. In terms of public health, we were among the first and hardest hit, but we are making strides forward now. Real estate prices have not really moved yet, and we don’t even know if they will.
Above everything else, who would want to live without New York? This is the place to dream, the world’s energy capital, the place where everything is possible and where everyone is equal. Don’t bet against New York and definitely don’t bet against Brooklyn.
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