The Big Apple turned into a rotten fruit that spoiled the Wall Street bunch. It turns out that Wall Street could star in the next reboot of Escape From New York as Goldman Sachs has reportedly joined the exodus of companies potentially fleeing The City That Never Sleeps for sunshine and tax advantages. Bloomberg News broke the story that the financial titan is considering relocating its $8 billion management arm to either Palm Beach County or Fort Lauderdale as it researches real estate spots and engages with local Florida officials about tax benefits. Could Wall Street 2.0 form in the Sunshine State?
Corporate America Waves Goodbye to New York
If the reports are accurate, and Goldman Sachs chooses to migrate down south, the banking juggernaut would not be the first. Billionaire Carl Icahn informed his staff before the COVID-19 pandemic that he would be moving his hedge fund from New York to Miami. Rival billionaire Paul Singer is closing up shop and transferring Elliott Management headquarters to Florida.
It is not only Wall Street behemoths making the switch. A diverse array of small- and medium-sized businesses (SMBs) and professionals are accelerating migration efforts from the high-cost, high-density metropolis to low-cost jurisdictions, like Florida and Texas. U.S. Postal Service data show that 246,000 New Yorkers submitted a change-of-address application to ZIP codes outside of the city over the last nine months, almost double from 2019. Tech firms that monitor smartphone data highlight an increased outflow from New York City to other nearby states or places within the state of New York, like the Hamptons or Westchester.
So many New Yorkers are rushing to the exit door that moving companies are unable to keep up with demand, leaving many of these businesses turning away customers.
If this becomes a part of the new normal, hemorrhaging state and city budgets will be hammered. The securities and trading industry accounted for 18% ($15 billion) of the collected state taxes and 6% of the city’s levies confiscated. For cash-strapped politicians, this is devastating news. And this is on top of the dire trends reported by Liberty Nation in September:
“A new report by the nonprofit NYC Hospitality Alliance found that 87% of New York City’s bars, restaurants, and nightlife venues could not pay full rent in August. Landlords are ostensibly not making any concessions for their tenants. It is estimated that 60% of restaurant landlords have not waived any rent, and only one-third have provided a 50% discount on rent. They are potentially counting on the reopening of indoor dining at 25% capacity starting September 30 to support these dining establishments.”
But unlike California, which is witnessing an eclectic exodus, New York has its own class of left-behinds. Many of the big city’s middle-income residents, students, and working-class folks are staying. But they are taking advantage of the drop in rents and saying goodbye to roommates. In October, Manhattan reported more than 16,000 empty rental units, raising the vacancy rate to north of 6% and lowering the cost of an apartment by 16% to a median $2,868.
City Slickers Go Suburban
New York is not the only major urban center to experience households selling their properties and moving to rural areas. The coronavirus pandemic changed things, at least temporarily, for some of North America’s biggest cities. With companies adopting work-from-home policies, people concerned about respiratory illnesses in the middle of a large city, and states and municipalities introducing tax-friendly environments, why bother staying put? Now that telecommuting has become the norm, you could reside in a mountain town and nobody would care – as long as you are productive and available.
Sure, these suburban locations do not have Liza Minnelli performances or Chinese food at 4 a.m., but neither does New York City – for now.
The Californication of New York
What good is New York if you cannot attend a Broadway show, eat at one of its world-renowned restaurants, and buy a ticket to Yankee Stadium to boo the Bronx Bombers? Before the public health crisis, New York had been one of the most expensive cities to live in due to its long list of things to do, such as its art exhibits, festivals, and extensive employment opportunities. Now that most of these attractive characteristics are relics of a bygone era, what keeps folks wanting to live in Manhattan or Staten Island? Not much – and the titans of industry understand this fact.
As former Vice President Joe Biden would possibly say, professionals in Florida and Texas are just as bright and just as talented as New York urbanites.
Read more from Andrew Moran.