From the IBO in May: "the long-term attractiveness of New York City as a place to live and do business is very much an open question"

A May 2020 Fiscal Brief from the New York City Independent Budget Office, focusing on the Executive Budget, warns Tumbling Tax Revenues, Shrinking Reserves, Growing Budget Gaps: New York City Faces Substantial Fiscal Challenges in the Weeks and Months Ahead.

It surely has gotten worse--with the coronavirus crisis causing increased unemployment and hardship, compounded by rising crime and social distrust, with the police brutality protests further exposing fault lines.

Below I pasted in some verbatim text regarding real estate and general risks, with emphases and commentary added. The bottom line is that the future is ominous.

What's interesting is that projects like Atlantic Yards/Pacific Park seems to be building into an optimistic future,

"We are hopeful there will be a vaccine and this will be resolved by the time buildings are open," said Amir Stein, a representative of TF Cornerstone, builder of B12 and B13, at the most Quality of Life meeting in June.

Last week, we learned that, yes, Chelsea Piers--in an industry that will be one of the last to reopoen--is still planning a fitness center and fieldhouse under the above towers. Indeed, if there is an effective, widely-available (and used) vaccine (or vaccines), the picture will re-set. But that's not guaranteed.

From the document: real estate

Real Estate. Taxable real estate sales in New York City reached a peak of $126.3 billion in 2015, not adjusting for inflation. Since then, year-over-year sales have declined every year except 2018, when there was a strong rebound in the commercial property sector. Before the Covid-19 crisis struck, IBO was projecting that real estate sales in 2020 would total just under $100 billion, similar to the $99.8 billion level of sales recorded in 2019. We now project that sales will be around $65 billion, a decline of more than one-third with respect to the value previously forecast. IBO forecasts a recovery in sales beginning in 2021, but we do not expect sales to rise above the $100 billion level again until 2024. 

The Covid-19 pandemic has hit the New York City metropolitan area harder than any other part of the United States. In the wake of this crisis, the long-term attractiveness of New York City as a place to live and do business is very much an open question. At a minimum, prices of both commercial and residential property are likely to remain below the record-breaking levels of recent years for a considerable period.

This surely isn't good for pricing at 550 Vanderbilt, the one condo building in the project, where a small number of expensive units remain to be sold, and some early buyers are already trying to sell.

It shouldn't affect the lower-rent "affordable housing," but could likely affect such middle-income housing, especially if workers could do their jobs remotely. Note that market-rate rents--and not just at the top-end--are dropping, as The City reported yesterday.

From the document: the upside

Risks. There is more uncertainty surrounding this local economic forecast than any that IBO has ever put out. Previous local economic shocks, such as 9/11 and the full-blown financial crisis precipitated by the September 2008 collapse of Lehman Brothers ended up being relatively temporary shocks to the economy that could be systematically managed after the fact. Given the already sustained nature of economic interruption and continued uncertainty about the future path of Covid-19, there are both considerable upside and downside risks that could substantially alter the outlook in either direction.The discovery and widespread use of an effective vaccine, allowing much of the public to safely resume normal activities, could usher in a much faster recovery than our current projections. To a lesser degree, targeted fiscal stimulus for state and local governments that would allow the city to replace lost tax revenue while continuing to provide higher levels of spending on essential services would mitigate the economic risk.

Such targeted fiscal stimulus might prevent what is now anticipated as a wave of evictions, especially as the $600 weekly federal unemployment insurance expires, and is likely to be replaced only fractionally--and not immediately.

From the document: downside

Conversely, a resurgence of the virus—driven by relaxing social distancing restrictions prematurely or increasing spread of the disease during the flu season this fall—could be followed by another round of equal or even more intense containment measures. This would counteract any early recovery and could extend the negative economic impact well into 2021 and beyond compared with our current projections.

New York has been doing better than most of the country, which is waking up to the fact that the relaxation of social distancing poses huge risks, but some widely publicized parties and social gatherings show the human tendency to violate such restrictions.

And when the school year starts, that looks to be a huge, and risky, social experiement.

From the document: the economy

Even without such a resurgence in the disease, it is particularly uncertain how quickly the local economy can reshape itself after this widespread and extended shutdown in economic activity, the likes of which has not been experienced in modern memory. The shape of the recovery will depend upon a combination of local behavior and the resurgence of tourism, which is a pattern that is particularly difficult to predict. While a certain segment of the city’s population might be willing to flood back into stores and theaters and restaurants as soon as possible, many establishments will have a very hard time resuming normal operations without a large influx of foreign and domestic visitors, who may be considerably slower to return.

When this document was written, New York was the nation's worst case, while today that script has flipped. Even if New York's tourist infrastructure were fully open for business, and it's not, we wouldn't be allowing visitors from many states. And international visitors have many more attractive options.

Yes, the weeks and months ahead will be challenging--and for more reasons than were contemplated in May.