What Was, What Is, and What Will Be
A friend shared this book and blog with me called Vanishing New York. Both chronicle the loss of the culture and institutions that made NYC a magical place to live in the 70s, 80s, and 90s.
Certainly rising rents, rising wealth, a rising proportion of apartments owned by people who don’t live here, and all in all, a major bout of affluenza is afflicting Manhattan and possibly greater NYC right now.
But I personally struggle with sentimentality and wistfulness. Yes, the NYC that I fell in love the in the early 80s is no more, replaced by something that is much harder to sing the praises of.
But what interests me more is not what was or even what is, but what will be?
Where is NYC heading?
How will it manage it’s transportation crisis?
How will it cope with rising sea levels?
How will it deal with entire blocks of empty store fronts, brought on by the rise of ecommerce and landlords who won’t accept that their space is no longer worth what it once was?
I loved this Atlantic piece that suggested NYC should reimagine it’s massive array of subway tunnels as the underground highways for autonomous vehicles. I have no idea if that is a good idea or even feasible. But I love the ingenuity and thinking the author displays.
The Gotham Gal and I are making an apartment building in Brooklyn that is heated and cooled by solar power and has enough left over that we can sell it to the deregulating energy markets in New York State. We hope to make a few more of these buildings and maybe we will inspire other developers to do the same.
I am drawn to the vitality of life in the outer boroughs where the melting pot vibe still pulses through the neighborhoods. Of course, gentrification can and will mess them up the same way it has messed up Manhattan if we aren’t careful. But we still have time to implement policies that can mitigate the negative aspects of gentrification.
My point is this.
We can, and probably should, bear witness to what has become of NYC and what we have lost in the process.
But we must also be working on, investing in, and imaging what NYC (and life in general) can and will become.
Change is the only constant. Fighting it is a losing proposition. Shaping it is the winning one.
I try to describe what I mean by the love for NYC in the 70s and 80s. It was “cool”. It had a serious “edge”. It had a sultry, sexy style– amidst the filth.It also had crazy high crime and a large smattering of anarchy.I’ve yet to succeed in getting anyone who wasn’t there to understand what I mean.
My mother said in no uncertain terms that you were not going to college in NYC…back in 1979. Influenced by the news. The blackout. Etc
I easily solved that by doing college 4 hours away (Ithaca NY), and frequently crashing with my NYU friends.
: ) Ithaca is beautiful. Unfortunately, only Columbia recruited me.
Here is an awesome photo treasure trove of the previous NYC:https://www.facebook.com/gr…
Subway, 1981: https://uploads.disquscdn.c…
i wonder what that little girl is doing today? Edit 19:23 GMT: “The little girl (my niece) is alive and well and a mother of 3 little girls.” A happy ending to my question.
That is how it was for me growing up.
Such a fantastic graphic.I see a lot of parallels to where I live today, Oakland, CA. I feel like we’re about 20 years behind in many respects, especially on crime and quality of life. Not “behind” as in “catching up with”, just at a different point, or phase, in the cycle.http://www.davidralbrecht.c…
When my wife was alive and we lived 70 miles north of Wall Street, occasionally we’d drive into Manhattan for shopping, plays, concerts, restaurants. We did a lot less of that after a day we parked our car on a street next to Saks Fifth Avenue: When we got back, our car, in broad daylight, had been broken into and some samples we needed for shopping, e.g., a large, nice lamp shade for a Stiffel floor lamp, were stolen. That was in the late 1980s. Then even the high rent areas of Manhattan were awash in broad daylight breaking and entering street crime.And as I recall, Rudy Guiliani got famous, and later Mayor, for attacking the Mafia which was rampant at the time.Net, NYC was an open sewer.Okay, okay, being romantic about about the old NYC, even though it was an open sewer, is a social fantasy, style, and posturing thingy.I grew up in Memphis. At the time the place was totally squeaky clean, top to bottom. That situation was left over from the years of the near dictatorship of the Crump Administration. Gee, as I recall, Mom was BFF with one of the Crump women, a real sweetheart!IMHO, NYC is not high on the list of the nicest, cleanest, safest, good places to live cities!!!
good story.Your last line doesn’t reflect how hugely different the place is now (post-1995 or so).
Agree. 1980’s stayed with my then wife overnight at her ‘rich’ uncles place on the lower east side. First things first: I was amazed at how shitty the building was. Looked like the projects to me. But I think they got that rent control obviously and just stayed there which is what I think many people do (who haven’t figured out a way to rent it out like my bil does and profits from). I think that apartment is still in the family. The tiles on the wall were like you see in public schools I even remember that. But all she did was tell me how much money he had.Oh my point. My car was broken into overnight and they stole the radio from it (was a nice car and a nice radio). Cops were very nice I remember. Came up and took a report very professional I was surprised.
Happened to my not-so-nice car & radio too, overnight in the Village. Was very routine then. Still is, in west coast cities.
Was because you were younger and didn’t have as much fear as you should have.
Fair. It also set the pace for me going out of my way in my 20s to find exotic danger. Rough neighborhoods of Rio, India, Peru (all of which where I did find trouble and narrowly came out unharmed).My twisted mentality a la, “If i can make it there (dangerous NYC), I’ll make it anywhere…”
Rough neighborhoods of Rio, India, PeruThere is a separate dynamic that says that people generally are less fearful in a city that is not theres than in what they already know.So someone will venture out in a place with a foreign language because in simple terms they don’t have a seat of the pants fear. It seems safer to wander out at the hotel in a city you are not a resident in ‘evil you don’t know’.”If i can make it there (dangerous NYC), I’ll make it anywhere…”Yeah but those places have ‘turkish’ prisons. (Wow can you believe that times were such you could actually make this joke in a movie!) 2nd clip from “Midnight Express” (ie ‘Billy! and the famous breast scene parodied by among others Jim Carrey)https://www.youtube.com/wat…https://www.youtube.com/wat……
Sounds a bit like present day Nairobi/Johannesburg.
Well written words on an important topic. Helping to shape the inevitable change is the right way to look at it and, I believe, a worthwhile effort. Thanks for applying the time, energy, and resources to it, Fred and GG. Your contributions are sincerely appreciated by your community.
“affluenza” – i like that. it’s very contagious. New York, London, et.c. et.c. and so on and so forth. the never ending spread of a financial capital epidemic. what is the antidote? a mega crash that will make 2008 a wistfully fond memory. A New New York City (not a typo) is a big project.
“Change is the only constant. Fighting it is a losing proposition. Shaping it is the winning one.”Fred, it sounds like you might be coming to grips with the fact that Union Square Ventures is no longer sustainable in its current form. If so, then good for you. The business consolidation phase tends to be brutal. Perhaps you might negotiate a deal with a large financial entity (VC firm, investment bank, hedge fund, etc) that would allow you to keep your team together and perhaps even the name “Union Square Ventures.”As it stands now Union Square Ventures is all but defunct.
Parts of the Highline have some many condos right next to the walk that it’s like being in a dark alley.
are there no building height restrictions?
Who knows? The lower part of the Highline, the old Meatpacking district, is under major assault by developers.
I seem to recall that Chelsea had some pretty serious height restrictions but things were reworked as part of the Highline wheelings and dealings.
Yes the change in Chelsea was both the creation of the highline and the associated zoning changes that allows for residential buildings to go 10 stories, 12 of affordable housing is included
i think that developers would rather that no one knows. is it called ‘zoning’, for light, in NYC?
When hasn’t NYC changed? It’s been a point of entry since the inception of the United States and before. The only constant in NYC is change.
But it always retained some of the old as it changed. It likely hasn’t changed this much since they built the subways and made paved roads.
I love nyc, and consider myself a ny-er though I no longer live there. I look at the world through a different lens created by the challenges and opportunities the city provided to me. It’s a very hard place to live, no doubt, but it’s a place rich w/ reward. I think everyone should experience both its vibrancy and its warts.That said, the tide of economic strife in nyc continues to rise unabated. The gap between the haves and have nots is growing, but today it’s best characterized as the haves and those just barely getting by. Obv that dynamic exists in many places today, but I think it’s exacerbated in nyc. The city and its denizens are facing economic challenges not seen perhaps since the city was on the verge of bankruptcy in 1975.It’s almost impossible to see how the city can fix its dilapidated transit system, with residents already saddled with triple taxation (fed, state and city), and DC decision-making so heavily influenced by partisan politics. (Whatever did happen to that big infrastructure investment anyway?) Rather than taking a preemptive and preventative approach, our gov’t too often seems to function out of necessity and w/ a white horse mentality. Economic danger is lurking in nyc and the repercussions, sadly, could reverberate widely.
H.G Wells – Eloi and Morlocks.
Also, the upcoming exodus of Chinese investors $ will crush the high end market in NYC. Crush.
It’s almost impossible to see how the city can fix its dilapidated transit systemThey can raise property taxes but that is something they are not going to do. But the property taxes in NYC are dirt cheap (compared to where I am it’s close to 3.6% of property value per year). Now of course raising taxes will impact values but maybe that is not a bad thing.As far as the other taxes it’s not drastically more than it is in NJ or for that matter Philly has a wage tax of over 4%.Honestly there is a boatload of money floating around NY that doesn’t exist in other less dense places or even come close. (Ditto for NJ for that matter which is high tax all around).
I like the Atlantic vision. Autonomous vehicle technology allowing for the never ending train …of private car(riage)s, which is a post modern trains 2.0 solution. a bit of a pricey tunnels refit though. An Amazon tax, per delivery, to help pay for it, and in return the old big A and the new big A work out a partnership to give Bezos underground access off peak in the wee small hours when the city that never sleeps…sleeps.
Thanks for this Fred. So thoughtful!Am I whistful for my 18 year old self with shoulder length hair living in a fifth floor walk up on Ave A and 2nd Street working as an usher at the Fillmore East?Hell yes!But I love NY and just got back from a long long walk— over the Brooklyn Bridge at dawn, ferry to LIC, Citibike cross the Williamsburg Bridge down to the Trade Center Memorial to sit awhile.Life is good and I look forward to more change with interest.Everything changes including ourselves
Amen. NYC will always be my first love 🙂
First love is a great way to put this.Me–coming of age, Me–kid riding subways being lectured in Yiddish by my grandfather on where not to get off, Me–with family at 181st and Cabrini on a Sunday. And on and on.The genius of Woody Allen was that he understood that the city was a major character in every person’s life that lives here.
Same is true for the entire world. I wonder how social networks new mobile experienced and crypto networks can bring world Peace. I think it has something to do with defeating the darkness of ignorance with the light of intellect. I’m still watching…
I think there is change and there is CHANGE. I’ve lived in NYC for some period of time in every decade since the 70’s And I have loved all of them up until now. NY has always been a miraculous, intoxicating mix of the high and the low, the rich and the poor, the creators and the buyers. And up until the last five years everything somehow managed to live together in an eccosystem that allowed for indiviuality, creativiity, high finance, big buildings, old neigborhoods, old ways, new minds, and the marginlized. And with them they brought their cultures, their shops, thier restuarants, their music, their art and their energy and dreams.NY has always had something for every body, thus those who felt they would never be accepted anywhere else could come to NY, find themsleves and others like them, hopefully fullfill their ambitions and be accepted for whoever they were.But to me it now feels like a city for one class of people, the very, very rich. And when that happens you lose the magic, you lose the serenidiptiy, you lose the pulsing energy of a place is filled with all types of people creating many things at once. Life on steroids is what New York always was, in good times and bad.Now it looks like a big box mall with many empty boxes and apts. The apartments sit empty much of the year as it’s mostly foreign money who own them. And we all know what has happened to the stores. We have lost our mom and pop stores and with it went mom and pop. We have lost our bookstores and with it went a whole part of our culture. Gone are our neighborhood pharmacies, our small markets in most cases and most importantly the creators of tomorrow cannot afford to even attempt to live in NYC. And as you say Fred, the same thing is now happening to Brooklyn and Queens will be next.Of course life is change, but all people do not change – especially at once. So, where will they go? And what do you when the magic is sucked out of what was without question one of the greatest cities on earth?
The storefronts issue is more complicated than it might seem. Manhattan Community Board 2 has been hosting discussions about it – some creative, potentially interesting approaches have been proposed:http://thevillager.com/2018…
Fantastic post Fred, as much I love reading your thoughts on technology, I have a particular fondness for your posts around urban planning, and NYC in particular, your passion and genuine thoughtfulness shines through.A few questions if you will:1. How do you feel about certain neighborhoods that were always affluent compositionally, but are rapidly changing nonetheless; I.e. the Upper East Side with the opening of the 2nd Ave Subway, radically shifting retail / restaurant tenants, but not “gentrification” per se. Do you still mourn a loss of character there or less so than in the downtown neighborhoods primarily catalogued in Vanishing New York? 2. Would you share where you’re developing in Brooklyn, or is that confidential for now? 3. How do you feel about Los Angeles? You’ve written about how you’ve been spending more time out West in certain beachside neighborhoods in West LA etc. Do some of these same concerns about “affluenza” and changing character carry over, or is Los Angeles as a much younger city in some ways a blank canvas? Surely older denizens of Venice & Santa Monica, I.e. John Baldessari etc are horrified by all the scooters and mass retail appropriating the “hip” vibe of Abbott Kinney etc.Would love your thoughts!
@Emerson in many ways the UES is “de-gentrifying”, I’ve lived in the 80s for over 20 years now, and in some ways it’s gone from the generational-lockstep stagnant resident base with retail and real estate somewhat preserved in aspic, to a fairly dynamic tenant mix and restaurant scene, I think much for the better.
This seems like a good time to plug the Matt Ridley book about rational optimism. NYC is better in nearly every way today.However, its still an awful place. SF rents are even higher, but at least SF is beautiful and also preserved the hipster vibe. Long island is far better. NYC has no beach, feels unsafe, smells like trash all summer, pushy unfriendly people, and over priced and over rated top to bottom.Solution: anywhere West of Denver, south of Charlotte. Those are the flywheels that will slowly but surely suck in the people out of cities like NYC. But Johns pizza in Greenwich is the best.
I’m curious about the solar thing. You cover the roof with photovoltaics? Here in Denver, where we get 300 days of sun a year, there is a lot of this. In the summer when you’re running your A/C at full blast it really makes a lot of sense. However, I would think in NYC where you don’t have as much sun and there are shadows from neighboring buildings, the economics are not nearly as compelling. Solar panels are still really expensive. Have you done any math on this? I would luv to see a sketch of the costs and revenue (in the form of savings and whatever is sold back to the utility)…
Wind and solar electric power are flim-flam, fraud, scam, ripoffs.(1) Intermittent. Wind and solar energy are intermittent.Wind power needs, right, wind and, ex-NYC Mayor Bloomberg, not even in NYC does the wind blow all the time.Solar doesn’t work with overcast skies, rain, snow.(2) Base Load Capex. Intermittent sources need reliable base load power. So, we still need the capex for that power. So, for a wind/solar user, we still have to connect them to the grid and spend capex for base load and the connections to have the base load power available when there is no intermittent power.(3) Ripoff #1. So, the wind and solar advocates want to buy base load power only intermittently and let others pay for the capex for base load and connections when the sun is shining or the wind is blowing.(4) Ripoff #2. Too many of the wind and solar advocates want to be able to sell power back to the grid on a cool, sunny day with high winds. No grid wants that power; it’s worthless. It’s even worse than worthless because it can cause the grid to go unstable and cause power outages over large areas, e.g., New England.(5) Ripoff #3. One way and another, wind and solar are heavily subsidized — we are forced by Congress to pay for it even if we don’t want it.(6) Ugly #1. Mayor Bloomberg had drunk so many 32 ounce, high salt and sugar Big Gulps of Renewable Kool-Aid that he wanted to put wind turbines on the tops of buildings. That would be as ugly as the view of Gotham in some of the Batman movies.(7) Foolish. There are engineering concerns, that stress from supporting the wind turbines against high winds would damage the structure of the buildings supporting the turbines.(8) Ugly #2. Wind turbines kill lots of birds, e.g.:https://www.youtube.com/wat…So, NYC will be the city of heavy rains of falling, chopped, dead birds. And bats, maybe the rabid kind?So, what the heck is going on? As in an old movie “it’s foolish but it’s fun”.Sure, it’s a thing, a political and social thing that is foolish but fun. So, heavily led by the NYT, willing to back nearly anything for attention, and close to the ethos of the NYC high fashion rag trade, the dance is just to say this stuff, just say it, over and over, and for concerns such as (1)-(8), just ignore them. Apparently such nonsense finds fertile ground in Manhattan, the wealthy parts of SF, Silicon Valley, and Hollywood — where people have money enough to be foolish when its fun, to propose waste to show that they have money enough not to care about the money wasted and to irritate people who want to be rational instead of foolish.
I tell my kids there are two numbers that if they change would totally change our world. The first is the conversion efficiency per unit area of photovoltaic. The second is the energy density of batteries. If either of these numbers say doubled, it would change life as we know it
(1) As put energy from the solar cells into the batteries, lose energy from heating the batteries from their internal resistance.(2) For a long winter, need some REALLY big batteries. With such batteries, might get some energy losses for leakage in the batteries waiting for the long winter.(3) When need energy from the batteries to power the grid, lose more energy heating the batteries from their internal resistance.(4) Also, when powering the grid, lose energy in the electric motors and generators feeding the grid. Yes, I know; I know; instead of electric motor-generator pairs, get the voltage up to that of the backbone of the grid by connecting the batteries in series and, then, switch the current back and forth to get a square wave approximation to a sine wave, and have some big in line inductor “low pass filters” to smooth out the rapid changes at the step functions. I’d want to talk to an electric power engineering guy about that.(5) If locate the solar cells in the US South and SW, okay, have less concern for snow, etc. but have to run the power to the NW, NE, Rust Belt, etc., and for the transmission lines the capex and opex are high and, before more in high temperature superconductivity, the power losses significant.Instead, use coal and natural gas and uranium, plutonium, or thorium fission. After some fine day, use nuclear fusion. These all do just fine in long winters and without trying to store electric power. Buffett made a biggie investment in BNSF Railroad, big in hauling coal from the US West to power plants a long way away. Since Buffett invests for decades into the future, apparently he is not much concerned about the threat of dirt cheap power from dream solar panels and batteries! IIRC, he also invested in the Keystone Pipeline.Oh, wait, I just remembered!!! From the movie Back to the Future we could use the flux capacitor!A little closer in, could use the barium-titanate capacitors from EEStor, ready in just another month or so for each month for the past ~10 years!Another really BIGGIE part of the solution: Tell the NYT and Saint Laureate Al Guru to STUFF it.But for powering cars, a 20 gallon tank of gasoline is super tough to beat. I posted that, but Mr. Hyperhype Elon Musk didn’t pay much attention and, apparently, started sleeping at his Tesla plants while they assembled cars in tents and asked their suppliers for cash back!For the dream batteries for cars, for too many car drivers, the charging time will still be too long. Or add up the Wattage needed for fast charging of a car battery that can replace a 20 gallon tank of gas — scary Wattage. Might want to keep your smart phone, digital watch, pacemaker, etc. some distance away!The pioneers get all the arrows: Let’s see what Israel, the Saudis, Egypt, Turkey, southern Italy, Spain, etc. do. Let’s see if solar panels in North Africa can successfully sell electric power to southern Europe.For those dream solar panels, I don’t think they will make a difference: The solar panels can go for free without much change in the overall engineering-economic (a Stanford expression) situation.To me, this renewables stuff looks like a lot of bandwagon climb on, fad, in-group, tribal behavior, big time log rolling with the beneficiaries:(1) People looking for subsidies, e.g. Elon Musk.(2) People looking to “sell” their rooftop energy back to electric utilities that, rightfully, don’t want it for free — commonly the wholesale price of power on the grid is 0.5 cents/KWH. On the grid, electric power from rooftop solar is just worthless — worse than that because it can lead to dangerous grid instabilities.(3) People who want funding for research for controls for a “smart grid” that could be more stable in the face of unstable, renewable power.(4) Owners of media outlets, e.g., NYT and NBC, who want stories to get eyeballs to get ad revenue. And so much of the MSM is so taken with this Obama-era effort at Chicago style patronage politics that we have to “look for the hidden agenda” and “follow the money”.We have a lot of just beautiful engineering in our grid; let’s not destroy it for no good reason.
You seem awfully pessimistic about this stuff. None of it is standalone economical right now but you should think of it as being part of a larger, diverse ecosystem of energy collection, storage, and usage. Electric cars are going to get better, just like everything does over time. Tesla’s are expensive but electric cars will get cheaper and then they’ll be everywhere. Thirty years from now, I would wager almost all cars will be electric. Here’s a next gen design: http://autoweek.com/article… Note they are using 400V internally which solves lots of issues like charging and it helps with range. The only physics problem in these designs that needs fundamental discoveries to overcome is the energy density of the batteries themselves.
is it possible to apply Nassim Taleb’s principle of antifragility to NYC’s “what will be” future? he says that the only way to begin to predict the future is to remove from the present that which will not endure, that will not be there in the future, the things that are fragile and do not gain from disorder. if future disorder includes rising sea levels then Manhattan’s tunnels may not survive (flooded out), and at the most extreme end of that spectrum even Manhattan itself may not survive. The Venice of the New World? perhaps long term planning needs to consider moving new development inland and to higher ground. that will not go down well with real estate magnates and their lobbyists. realpolitik.
.Urban real estate is demand driven. Demand determines usage and pricing.The demand for retail space is driven by the ability to achieve a certain revenue/SF of which 7-10% is then used to pay rent. I have looked at millions of tenant income statements over the last 40 years to know this beyond any doubt.What you are experiencing now is simple demand driven outcomes – people are spending a larger amount of their retail $$$ on the Internet and thereby starving the street level retail for the same $$$.In certain areas of NYC, you cannot increase retail sales because they are already at maximum density – can’t cram in any more people and attendant buying power.If sales go to the Internet – not a subjunctive notion, it is happening at an accelerating rate – then there are fewer $$$ available to buy retail goods at the street level. This is a reality made even worse by people browsing in the “bricks & sticks” and buying on the ‘net.This drives the tenant mix, meaning that if there is no market for a certain type of retail, it must be backfilled with a different type. If you are adding restaurants and reducing hard goods, then you change the tenant mix.If you add restaurants, then you simply fall into another financial analysis – how many seats within a 1-2 miles radius, the average expenditure per seat, and the unmet demand for food service?Those numbers are also tapping themselves out.Ultimately, price confronts vacancy. Right now it is very hard for landlords who are seeing incredible upper story residential demand to believe that the problem is the rent.Rent can only be 7-10% of gross revenue at the street level for the tenant to survive. Nothing is going to change this.This is not a new problem. It is taking a little longer to flush itself out because the economy is good and nobody wants to believe it.JLMwww.themusingsofthebigredca…
I am much simpler about it than what you are saying which is true on a large scale and with seasoned operators or projects. I try to buy as cheap as I can and I try to get as much rent as I can. Generally it’s so simple that I can get the numbers in my head and make a decision. In the markets that I am in it’s all about the rent. RE does not appreciate in value at all. When people buy in NY they are betting on the appreciation I think as much as anything. My guess is that this is baked into the project that Fred is doing. Hard to believe it’s not. Besides everyone in NY is just used to things going up and up so why shouldn’t they? Even in the downturn that hit everyone else 2008 NYC still went up I believe.What annoyed me was when I browsed around to that blog that Fred referenced and found this story:http://vanishingnewyork.blo…In particular this line:They list outrageous rents and come with a Jane Jacobs quote.So here we have (and you know I love this) a writer who thinks he is in a position to determine what rent someone should charge for space and if it’s not the amount he (will no ownership, training or experience in real estate) decides to call it ‘outrageous’ it is. What is not outrageous to the guy who doesn’t own the property? News flash. If you own the real estate and can afford to pay the carry costs it’s your decision if you want it occupied and what you want to rent it for. Plain and simple.You want cheaper rent? Come to where I am. Come to where there is no foot traffic some shitty place in an outer borough. Or come to some small town in New Jersey and you will not have to pay those high rents for your cute little shop. But don’t feel you are entitled to live in NYC and have your small shop with affordable rent and the high traffic or cache of living their. You don’t. The owner of the property gets to decide the use and the rent. And if they can either afford to loose money or they get burned by their (business) strategy then it’s on them.Also this:”Everywhere I walked in Manhattan there were empty storefronts, and it seemed like one big game between landlords and tenants. All these landlords waiting for a pharmacy or bank to sign a 10-year lease. Is there a better analogy for that then the game of Monopoly?Everyone so bothered by the greedy landlords. Typical case of people feeling free to spend money and allocate assets that are not theirs that has all upside and no impact on them. I run into this with the things that I sell. People always assume that it would be there for them when they needed it at an affordable price. And that someone else wouldn’t have snapped it up years ago at that affordable price ahead of them. https://uploads.disquscdn.c…
.Cheaper rents, cheaper costs of RE ownership is what initially drives gentrification. If you can be one or two subway stops from your job in Manhattan (to which you currently could walk) then you are faced with a value and quality of life proposition. You will often take the lesser cost or higher quality of life prong on the decision tree that is life.Once the area being gentrified hits some level of critical mass, then the local demand for support retail kicks in to validate and support the gentrification momentum.All of these mechanisms are things well known to RE professionals.Once the first wave of gentrification takes root, there is a surge in value and the cost to get in is considerably higher than when it was a ghetto (technical RE term meaning pre-gentrification).None of this is new.The banks used to have control on the speed of gentrification with their lending practices. Much the same way the pension funds tried to stay out of cities of less than 1MM population.There is science at work here.Having said that, your instinct and experience is real and, in many instances, superior to the analytical approach. You can feel the wave before it arrives.When you build tall buildings with ground floor retail, you have to convince sophisticated partners and lenders so you learn to do detailed demographic and buying power analysis.There are a ton of sites today which publish demographic information, but back in the day you had to develop your own techniques. There is also an element of traffic analysis which was a proxy for the movable nature of buying power.There is a huge difference between 20,000 cars a day versus 200,000 cars per day.Landlords want the banks and pharmacies because of their real grounded demand plus their credit. When evaluating a rent roll, a sophisticated landlord builds a valuation matrix based on the credit of the tenant, the size of the lease, the rental rate v current market, and the remaining term.It doesn’t take a rocket scientist to realize how important the credit of the tenants is to the underwriting of the cash flows from a building.In the end, it is and always will be:(Market rent x rentable area x 95% (implying a 5% vacancy loss))/cap rate (market derived number based on market sales) = capitalized valueBanks will lend 75% of capitalized value.If they have a 1.5 x DCR (debt service coverage ratio), then it is a AA credit.This has to be substantiated by the credit worthiness of the tenants.On one hand it is a fairly sophisticated business. OTOH, it is all just numbers.You have to be able to build the stuff to dance to the then current market numbers.JLMwww.themusingsofthebigredca…
Ah! Things I can only dream about you speak of. Credit worthy tenants. But I would think in the NYC market with so many knowledgeable and more importantly wet behind the ears posers with money that some of those figures will get stretched a bit and especially given that values appear to go up and up. Hard to believe people aren’t bidding up projects or getting hyped by brokers.I am faced with this type of situation more often than not (in this case Johnny is a psychiatrist MD who must have health problems, first I am hearing about it). Regarding the lease for next year, Mary & I would like to consider moving to a 3 year lease. We would like the monthly cost to remain fixed at $_____ for the lease duration. We do have one concern with a longer lease. If I, Johnny, should fall ill and not be able to work, their is no exit mechanism at all in the lease in such a situation. We would have to pay the remainder of the lease without I having income to pay those costs. Do you have any compromise suggestion for such a situation? I should name the company ‘red headed re’.
.This is a very technical issue, but solvable. You have to get a big security deposit, make the tenant pay for their tenant improvements, and the assignment of the proceeds of a disability policy plus a monthly payment into a contingency fund account.JLMwww.themusingsofthebigredca…
All good but the general rule I have gone by for years with small time tenants (and low rent) is that a long lease is good for the tenant but bad for the landlord. If the tenant goes bust the amount is typically small enough that you will probably not feel it’s worth your effort to pursue legally (and that assumes there is money to go after) legal fees what not. And getting more money in security deposit is first of all not easy in the state I am in and also they don’t have that kind of money laying around and people are not knocking down the doors for property either (most important ‘demand’). Usually with medical tenants, if they are happy, they stay nobody wants to move a practice (patients and what not).I have a hard enough time having tenants provide me with an insurance policy with the LLC as named insured and then making sure that I actually get the document from them. Sure I could go for some kind of disability policy as well but that could break the deal. It’s actually not the main way I earn income and small i relation to other ways I make money. I do it because it’s fun a bit as well and honestly secondary meaning my father did this. Time wise it’s a sure looser for me. Now if I was located elsewhere I would do it differently. But no way where I am does it pay to do big projects.
.The single most important criteria for tenants is do they pay the rent on time and have they always?JLMwww.themusingsofthebigredca…
For the issue of rising sea levels affecting NYC, here’s a simple, essentially best possible, solution — f’get about it.Of course, the NYT wants to use global warming, climate change, rising sea levels, from human sin of fossil fuels — the usual trilogy of human transgression, retribution, redemption — based on the usual base level of anxiety from the unpredictable and unknown to have a continuing supply of stories to grab eyeballs and get ad revenue. I.e., if can’t find some problem to cause high anxiety, then create one!!!!By the way, the redemption part usually involves sacrifice, that is, giving up some money, in this case to flim-flam, fraud charlatans.Apparently the NYT believes that NYC has a lot of gullible people.
Hopefully part of NYC’s future is that this bubble will burst.I don’t understand the runaway development or how it was allowed to happen. I don’t like it. But I also know NYC can’t live in the past. So I applaud your solar building. I’m curious, though, where on the rent spectrum it’ll fall.I love the things I see around the city now that make it a friendlier place to live. I always think to myself, “Wow, that would have made my life so much easier when I lived here.” I don’t miss the crime rate that existed when I lived there. A lot of things are better now.But technology is created by privileged people. And it often fails to factor in people who aren’t privileged. An example is the phasing out of subway cards. When I lived in the city it was tokens. I don’t miss carrying around tokens, but I don’t understand how homeless people are now supposed to use the subway 🙁 A city that makes it possible for the wealthy to live as though the non-wealthy don’t exist has lost its soul.So a subway of self-driving cars might be a good idea (I’m not sure why). But it needs to be created explicitly with the un-monied in mind, or we’re just another step on the road toward becoming “Tron.”We don’t want to create a city where Basquiat could never have met Warhol.
Chinese investors played a big part in the run-up these last several years. Those dollars are drying up and going back to China for all sorts of reasons. Hence the sudden softness in luxury end of NYC and Cali markets. Safety in certain parts of the south, but riskier than stock market in NYC and CA
I’ve heard that San Fran is softening in spots. I didn’t know anything like that was happening in NYC. Very interesting to know, thanks.
.I agree with you that there is volatility in Chinese ownership of high end real estate in the US, but the money is not going back to China.If you were a wealthy Chinese person, you may have had to get permission to buy that US real estate and to remove that wealth from China.What happened was that credit worthy wealthy Chinese folks borrowed money in China from an approved bank with a local Chinese presence. Then, over the years, you repaid that debt in China leaving you with a free-and-clear asset in the US.You then extricated your equity from the US asset leaving you with an escape fund in the US in case China cracked down on overseas investment plus you had meaningful currency diversification.This is one of the reasons why you bought uber valued US real estate – to move a lot of money.This was an art form when South Africans extracted their wealth from South Africa. They were forbidden to move wealth out of SA, but did it as I noted.JLMwww.themusingsofthebigredca…
The lack of support and placement of the arts is something that massive increase in wealth generally and the blockchain specifically needs to address.
What a great example Karen. In that one sentence you’ve summed up where NY is now. I truly believe that. And trust me, it breaks my heart.
If alive today and living in NYC Dostoevsky may have said “the degree of civilization in a society can be judged by entering its… subways.” Yes, it is a bubble, and bubbles do burst. This one will. the aftermath could be a wonderful opportunity for silenced voices to finally be heard, calling for change and a rebalancing of priorities, away from what is essentially naked greed to a more civilised set of collective human needs. living in this NYC sounds like hell.
I think people living in NYC now who are young (or who are old and didn’t see the 70’s) wouldn’t really understand much about the way the city was.The 70’s were the “Ford to City: Drop Dead” days. As memorialized by the NYDN cover which I have posted before (1973)The reasons why NYC is what it is today are numerous. They include and in no particular order (ie SNL being first is arbitrary). Hint it’s not the theater, the culture or the museums (more likely the dining which near everyone enjoys that has money it seems and on a regular basis).a) Saturday Night Live (drawing a huge amount of positive attention to the city). Yeah believe it. Debut in 1975. An ad every week watched by millions for a city. For that matter Nightly News all comes from NYC every single night. Not from my city.b) 9/11 improving security with now what is a great police force. The old force was I think pretty close to what you see in ‘The Taking of Pelham 123″ the movie.c) Rudy <— Yep.d) Money from foreigners <— Big factor foreigners parking money from their tin pot counties in NYC real estate stokes the economy and has driven up values overall.e) Dining options. God knows people love NY for the restaurants. Take that away and you would find things a bit different.f) Safety as a result of the balance between (and this is important) desirables and riff-raff changing so that you generally feel safe almost all the time. Very important. Not sure what the ratio is but all those high prices and money change the balance on the street in a way that make you feel safe. I am referring to Manhattan and parts of Brooklyn.g) Trump Tower which led to more upscale developments by others (emulating Trump) which led to ‘d’ and consequently ‘f’. Don’t think that many of today’s developers were inspired by what he did? They were no question about it.h) Wall Street money driving real estate purchases. There use to be stories and articles about how people on the street were going to spend their yearly bonuses. Hey my city never benefited from that…. https://uploads.disquscdn.c…
The Gotham Gal and I are making an apartment building in Brooklyn that is heated and cooled by solar power and has enough left over that we can sell it to the deregulating energy markets in New York State.Would love to know the economics of that since it doesn’t seem at all possible (or even close) given the size of the roof for an apartment building and the number of units below the roof as well as the days of sunshine. And that is without even knowing the number of stories or the cost and so on. Also what happens if someone builds and blocks the sun? (I assume that was already considered but it would be a factor in other places).Edit: Fred may be talking about solar for common areas of the building not as an offset to residents or landlord energy bills. But even if residents bills (and as a marketing angle) that’s funny given the high costs of renting (or buying) a new or newly renovated property would not seem to honestly be a big factor other than psychology of it. Reminds me of people buying an expensive electric car (overpaying for the electric part) and then crowing about how they save money on gasoline. Honestly utility cost in a small apartment is very little relative to the other expenses you pay.
Rooftop solar is from subsidies, i.e., legal stealing money from working people, and a virtue signaling check mark: Solar? Check.For some people, e.g., the greenies, talking up renewable energy is “foolish but it’s fun”.Don’t worry: Over time, nearly all the electric power for that building will come from Con Ed.
In two weeks Grid+ will be releasing a research report regarding the energy regulation landscape in the U.S.. Hopefully they will be identifying where they plan to open new retail subsidiaries after their launch in Texas. The Northeast seems most likely with California being a close runner up. Given that they did all the coding for the Brooklyn Microgrid and are ConsenSys’ first major spinout I imagine there would be a real appetite to launch in New York if feasible.Using their system in conjunction with your solar panel installation and a battery would allow you to create additional passive income streams by selling back your building’s excess power when rates were best and even engaging in automated energy arbitrage. Plus the smart agent saves you money up front by scanning all available wholesale rates, selecting the cheapest, and then applying a fixed markup which comes out to be far cheaper than the monthly fixed rates typically offered by retailers.
Does NYC have a corruption problem?
New York is a city that is in constant renewal, so, it will continue to thrive and survive!
I do want to comment on NYC as a place as someone who has never lived there (and never would). I was raised in the midwest (Eastern Iowa). The population density of NYC is absolutely staggering to me.I’ve had two experiences in NYC in my life that have framed my view of it. First, when I was about 10, my parents brought us there for a family vacation. My mother was raised in East L.A. and even though we were being raised in affluence, she felt like we needed to see the underbelly of life. So, in 1973, my parents took us on a walk through Time Square at 11p on a Saturday night. My father was getting propositioned by hookers and people were trying to sell us drugs despite there being 3 kids under the age of 11 with the group. It was an experience I’ll never forget.Second, in the early 2000’s I was working for a telecom startup and we were selling to Verizon. There was a period where I would take the train from Baltimore to Manhattan for day trips to visit the Verizon HQ. Things had changed a lot from the distant experience I recalled in the early 70s.In both cases, I found NYC to be a place I could never live in. With respect, I found there were way way too many people and that the people themselves were for the most part, not very nice. They were brash and distant and very self absorbed. While I have read about all the “cultural” things and even saw some of the museums a bit while I was there, I always came back to this thought, why would people want to live in this place? It seems like a constant struggle, mainly against all the other people that are there. I marveled at how lonely everyone seemed to be, despite being surrounded by people constantly.
The population density is unparalleled anywhere in the US. This engenders a variety of business and experimentation that can only exist there. Chris Anderson’s The Long Tail does a good job of discussing how much cool stuff can rise up when you have that much density.In addition to that, NY is still the major East Coast entrance to the US for immigrants. There’s a constant source of new blood coming into the country. Some of the them disperse up and down the coast and inland.I appreciate NYC more and more and greatly enjoy visiting my friends who live in the city. The sub-markets are very different and there is peace to be found.
I listened to a podcast a while back where a lot of insights were shared around the impact of driverless cars and the auto industry in general. A part of this podcast talked about how this might impact real estate. Some of the stuff in the podcast seemed to suggest the exact oposite of what this post is suggesting directionally.With cars that can drive themselves and that are smart(er) in general. Some theories seem to imply that cars in the near future will know much sooner in advance when they might need service, and they will go and get serviced by themselves. This, and a car that can go park itself talking to cars that are moving in and out of parking spots, changing from being idle to being active seems to suggest a great deal of efficiency. Then, another thought might suggest that cars will become more like iPhones where the hardware is generally the same and the personalization is around software. This might lend itself more to sharing and/or might suggest that cars might become more modular. More like shared pods plugging in an out of some main engine piece.What all of this might mean for real state is that cars that are this efficient to park themselves and to get service by themselves might lead to parking lots and many corner gas stations to close down. All of which currently occupy prime real state. Then, these spaces will get reclaimed for office and apartment buildings. This will lead to a huge supply and likely not as much demand. With these smarter and more efficient vehicles many people might get to the city much faster coming from the suburbs. if an hour-driving commute is cut down to 35 minutes, many people might move out. OR, what is likely to happen. The huge supply of unitized real state might make rents go lower and the price of real state go down dramatically as a result. Another thing is that if you bought a studio apartment in Brooklyn for 700k today, when this future arrives, you might see the same apartment selling for 30% or 50% cheaper.Might sound like science fiction / far fetched but then again, many things did 10, 15 years ago and they are here today.
I loved this Atlantic piece that suggested NYC should reimagine it’s massive array of subway tunnels as the underground highways for autonomous vehicles. I have no idea if that is a good idea or even feasible.1) Impossible to believe that is a small space it could possibly be more efficient to move people in vehicles that hold less than in a space that can hold so many more (like a train). It just doesn’t make any sense at all period. Call it what it is.2) The subway system takes a tremendous amount of traffic daily. Part of the issue with maintaining it (and or replacing with better vehicles and a different system) certainly has to be shutting it down. If that happens (even in stages) what happens to the daily riders. We are not even talking about building a new bridge or digging a new tunnel. We are talking about using an existing tunnel which is heavily used.I don’t even get how this could be considered a viable idea to even kick around.3) A less stupid (and head in the clouds) idea would be building a deck over the existing streets to hold the autonomous vehicles. Note I said ‘less stupid’. Chance: Zero nobody wants to wreck a view and the disruption would be out of this world.
on 1. i wonder what averaged percentage of total track length is occupied by trains at any one time in a twenty four hour period? 240 miles of track (whatever 368 km is) divided by the total length of all trains combined. 10 miles of trains? 20? that’s still less than 10% of nominal capacity. autonomous vehicle tech could double (maybe triple, or even quadruple) that number in its sleep. The existing tech is so very inefficient at distributing.
would love to hear more about your real estate development projects on the blog
.”It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”You will recognize the opening paragraph of A Tale of Two Cities. This is New York City.It is a wife or a mistress depending upon your perspective. You either love it or use it.Freddie has decided to love it for very good reasons. To him it is a wife.I have been going to NYC for more than half a century and I cannot fathom loving it, therefore resigning myself to using it for all of its excellence and excess, but I would never live there.NYC is enmired in leadership from a certain political persuasion which sentences it to never fulfilling its promise. It will always be overtaxed, underserved, excellent, and a crap hole, but it will always have the Statue of Liberty and be a gateway to the United States.It is the best of cities, it is the worst of cities.JLMwww.themusingsofthebigredca…
Hi Fred, Long time reader here. I would love to hear more about the apartments you’re building. I wasn’t able to find anything online.
How much have sea levels come up in NYC?
“Change is the only constant. Fighting it is a losing proposition. Shaping it is the winning one.” Love that line.
This time the troubles of NYC are different. I expect NYC is headed into very troubled water and way worse than the 1970’s. Why?– Homeless, junkies on every corner, unreported crime (don’t tell me about the mayor’s statistics that crime is down), internet disruption of storefronts, etc.I could go on for days at how poorly NYC is run. The mayor is just horrible.NYC no longer has a monopoly on culture, food, trendsetting, etc. Most cities now have all of these things.I have so many friends who are finished with NYC. It’s not worth the trouble anymore.
Great post. I shared that last sentence on Twitter.”Change is the only constant. Fighting it is a losing proposition. Shaping it is the winning one.”
if Manhattan continues on its current track one day it will resemble Venice, Italy: a city too expensive and inconvenient for most people to live; where workers flow in at sunrise and out with the waning sun, leaving only tourists to roam the souvenir-laden streets and keep only the well-located restaurants alive; where much of the city is owned by those that live far, far away. What a dismal view. We don’t seem too far removed. (Except that our sidewalks remain dry for the time being at high tide…)