5 ms·

How Manhattan Became a Rich Ghost Town

37 points by eplanit 8y ago

pavel_lishin 8y ago
> Walking around the Upper East Side, where I live, I find it striking how many of the establishments still standing among the many darkened windows are hair salons, nail salons, facial salons, eyebrow places, and restaurants. What’s the one thing they have in common? You won’t find their services on Amazon. The internet won’t cut my hair Ok, fess up: how many of you reading this just came up with a dumb startup idea?
- ilaksh 8y ago
  There are actually already a lot of "Uber for hairdressers" apps. One of them was actually partnered with Uber. So it seems like actually the internet _will_ cut your hair. I suspect there may be a social aspect to some of the salons that could be somewhat missing with only one person coming to your house though. But maybe the app just needs to incorpate a group video chat or something to get that as well. Someday we may not even need to get out of bed if we don't want to. Which might not be very healthy of course.
- gumby 8y ago
  There's a cultural gap: I just want my hair cut quickly once my gf has told me it's too long. On the other hand she likes to dress up and go to the hairdresser and have an experience (how she manages it while working for a startup and looking after her kids 1/2 time I haven't been able to figure out). I'd be glad if haircut could be uberishly provided to me at work (I wouldn't want the mess at home) while her experience requires a dedicated space and several people working there (and several concurrent customers as well). A machine that did it would be better if the capex/opex tradeoff were worth it. Oh and I can't take my dog to the haircutting place (he has to wait outside) while he does come to work.
skybrian 8y ago
It seems like this should be a temporary problem. Won't landlords eventually get tired of not getting any rent?
- efields 8y ago
  You'd think that, but you can write off some amount of that as a loss. I don't think it means, "I should have gotten $1m for this space this year because that's what I think its worth and I didn't get that so $1m write-off," but something to this affect. This is happening in cities big and small.
- Scoundreller 8y ago
  Eventually, maybe. If they’re planning to tear it down in 5 years, it’s hard to find someone that will sign a lease for that short period of time.
- robbyt 8y ago
  A friend of mine is a commercial landlord in NYC. He told me how this works... Companies will seek extremely high rent, and make concessions to the tenants to offset the high rent. E.g., rent this space for $50k/mo, and we'll give you free storage, free power, and free construction build-out. Then the landlord sells the building with the ultra high lease included as an asset, to get an even higher value out of the sale. Rinse and repeat. The amount of money they get from the sale of the property with the high lease offsets the loss they're taking by keeping it empty. And they don't have to bother with as many annoying tenants.
viburnum 8y ago
Empty storefronts are a negative externality and should be taxed at a high rate.
- Scoundreller 8y ago
  Why stop at storefronts?
- deleted 8y ago
  [deleted]
tsunamifury 8y ago
I have been speculating for some time that we are looking at a commercial real-estate correction or crash as many of the leases are now being held off the market by big firms (Blackrock) while larger retail is actually reducing its foot print. I don't know what the disconnect here is, but my nefarious interpretation is that the larger funds are actually holding off a crash by not leasing, thereby hiding what would be a downwardly market adjusted portfolio value. The counter to this is that office space could fill it up, but again, large firms are contracting their downtown footprints for a wide variety of reasons, including cutting costs. Only a few tech companies are expanding. Looking at the mega projects like Hudson Yards which has lost and reduced several leases before even opening, SF's failed 7X7 mall which opened with ZERO leases and older established locations like 666 5th Ave struggling to find new buyers -- it appears pretty grim. Putting all that together, you have an interesting crash that could actually affect the current White House in a very personal way.
- partiallypro 8y ago
  I don't disagree that people are doing that, kind of. I don't think it's nefarious though, or some plot against Trump or potential plot against Trump. I think the simplest explanation is merely that real estate is a great vehicle to park capital for foreign nationals. NYT's ran a piece about this a few years ago with people hiding their money in real estate in markets like New York, Nashville, Atlanta, etc. It was largely Chinese money. The fear is if there is a longer than expected "trade war" and this property becomes sold in quick succession leading to a crisis to shore up balance sheets in East Asia. China will not admit it, but I have heard ramblings from very smart people that their economy is currently on the brink. They're waiting out for the midterms, but if what I've read/heard is true they might not be able to hold out that long without causing significant damage to the global economy. You have the "trade war" with the US and high debt loads, but you also have a ton of manufacturing flight to countries like Vietnam. Things could get ugly if the dominoes start to fall. That being said, I do think there is still reason to be optimistic that this is just a worst case and things will work out...but I still think foreign nationals parking money in real estate is a big problem that drives out actual tenants by obstructing true supply/demand.
Scoundreller 8y ago
Dunno about Manhattan, but Toronto used to rebate property taxes on unused real estate. The solution is simple here. A high property tax rate on unused real estate. Who would vote against that?
- hackeraccount 8y ago
  Anybody who owns property. Any who wants to buy property. Don't tax you, don't tax me, tax the man behind the tree.
hourislate 8y ago
I once approached a Property Manager about a retail location in Toronto. It was sitting empty for about 1.5 years because the lease was very expensive. I mentioned to him that it would be worth renting it to me for less than having it sit empty. He laughed and said that the property has been paid for the last 50 years and is just one of like 240 Properties the Landlord owns. He said the Landlord could wait 20 years for the lease price he wants and it wouldn't matter one bit.
pontifier 8y ago
As a Landlord I can truthfully say - paying rent is for suckers. This world would be a much better place if the entire rental market system was outlawed.
- A2017U1 8y ago
  As someone who rents in a large overvalued city, my landlord is getting a 1.5% yield before taxes and deprecation. That's 60+ years of rent to outright buy the same place. More than happy with that situation while he speculates on near impossible capital gains occuring.
  - pontifier 8y ago
    It's overvalued because a bunch of people bought stuff when it wasn't overvalued and charge as much as they can for rent. High rents mean high resale value. You're probably paying 2% or more of the original purchase price every month. The prices will go up until it is not economical to buy anymore.
RhysU 8y ago
> Their strategy bodes the disappearance of those quirky restaurants, curious antique shops, and any coffee shops that aren’t publicly traded on the NYSE. Curiously pro-linked markets given that SBUX lists on Nasdaq.

37 points by eplanit 8y ago

> Walking around the Upper East Side, where I live, I find it striking how many of the establishments still standing among the many darkened windows are hair salons, nail salons, facial salons, eyebrow places, and restaurants. What’s the one thing they have in common? You won’t find their services on Amazon. The internet won’t cut my hair Ok, fess up: how many of you reading this just came up with a dumb startup idea?

ilaksh 8y ago
There are actually already a lot of "Uber for hairdressers" apps. One of them was actually partnered with Uber. So it seems like actually the internet _will_ cut your hair. I suspect there may be a social aspect to some of the salons that could be somewhat missing with only one person coming to your house though. But maybe the app just needs to incorpate a group video chat or something to get that as well. Someday we may not even need to get out of bed if we don't want to. Which might not be very healthy of course.
gumby 8y ago
There's a cultural gap: I just want my hair cut quickly once my gf has told me it's too long. On the other hand she likes to dress up and go to the hairdresser and have an experience (how she manages it while working for a startup and looking after her kids 1/2 time I haven't been able to figure out). I'd be glad if haircut could be uberishly provided to me at work (I wouldn't want the mess at home) while her experience requires a dedicated space and several people working there (and several concurrent customers as well). A machine that did it would be better if the capex/opex tradeoff were worth it. Oh and I can't take my dog to the haircutting place (he has to wait outside) while he does come to work.

skybrian 8y ago

It seems like this should be a temporary problem. Won't landlords eventually get tired of not getting any rent?

efields 8y ago
You'd think that, but you can write off some amount of that as a loss. I don't think it means, "I should have gotten $1m for this space this year because that's what I think its worth and I didn't get that so $1m write-off," but something to this affect. This is happening in cities big and small.
Scoundreller 8y ago
Eventually, maybe. If they’re planning to tear it down in 5 years, it’s hard to find someone that will sign a lease for that short period of time.
robbyt 8y ago
A friend of mine is a commercial landlord in NYC. He told me how this works... Companies will seek extremely high rent, and make concessions to the tenants to offset the high rent. E.g., rent this space for $50k/mo, and we'll give you free storage, free power, and free construction build-out. Then the landlord sells the building with the ultra high lease included as an asset, to get an even higher value out of the sale. Rinse and repeat. The amount of money they get from the sale of the property with the high lease offsets the loss they're taking by keeping it empty. And they don't have to bother with as many annoying tenants.

viburnum 8y ago

Empty storefronts are a negative externality and should be taxed at a high rate.

Scoundreller 8y ago
Why stop at storefronts?
deleted 8y ago
[deleted]

tsunamifury 8y ago

I have been speculating for some time that we are looking at a commercial real-estate correction or crash as many of the leases are now being held off the market by big firms (Blackrock) while larger retail is actually reducing its foot print. I don't know what the disconnect here is, but my nefarious interpretation is that the larger funds are actually holding off a crash by not leasing, thereby hiding what would be a downwardly market adjusted portfolio value. The counter to this is that office space could fill it up, but again, large firms are contracting their downtown footprints for a wide variety of reasons, including cutting costs. Only a few tech companies are expanding. Looking at the mega projects like Hudson Yards which has lost and reduced several leases before even opening, SF's failed 7X7 mall which opened with ZERO leases and older established locations like 666 5th Ave struggling to find new buyers -- it appears pretty grim. Putting all that together, you have an interesting crash that could actually affect the current White House in a very personal way.

partiallypro 8y ago
I don't disagree that people are doing that, kind of. I don't think it's nefarious though, or some plot against Trump or potential plot against Trump. I think the simplest explanation is merely that real estate is a great vehicle to park capital for foreign nationals. NYT's ran a piece about this a few years ago with people hiding their money in real estate in markets like New York, Nashville, Atlanta, etc. It was largely Chinese money. The fear is if there is a longer than expected "trade war" and this property becomes sold in quick succession leading to a crisis to shore up balance sheets in East Asia. China will not admit it, but I have heard ramblings from very smart people that their economy is currently on the brink. They're waiting out for the midterms, but if what I've read/heard is true they might not be able to hold out that long without causing significant damage to the global economy. You have the "trade war" with the US and high debt loads, but you also have a ton of manufacturing flight to countries like Vietnam. Things could get ugly if the dominoes start to fall. That being said, I do think there is still reason to be optimistic that this is just a worst case and things will work out...but I still think foreign nationals parking money in real estate is a big problem that drives out actual tenants by obstructing true supply/demand.

Scoundreller 8y ago

Dunno about Manhattan, but Toronto used to rebate property taxes on unused real estate. The solution is simple here. A high property tax rate on unused real estate. Who would vote against that?

hackeraccount 8y ago
Anybody who owns property. Any who wants to buy property. Don't tax you, don't tax me, tax the man behind the tree.

hourislate 8y ago

I once approached a Property Manager about a retail location in Toronto. It was sitting empty for about 1.5 years because the lease was very expensive. I mentioned to him that it would be worth renting it to me for less than having it sit empty. He laughed and said that the property has been paid for the last 50 years and is just one of like 240 Properties the Landlord owns. He said the Landlord could wait 20 years for the lease price he wants and it wouldn't matter one bit.

pontifier 8y ago

As a Landlord I can truthfully say - paying rent is for suckers. This world would be a much better place if the entire rental market system was outlawed.

A2017U1 8y ago
As someone who rents in a large overvalued city, my landlord is getting a 1.5% yield before taxes and deprecation. That's 60+ years of rent to outright buy the same place. More than happy with that situation while he speculates on near impossible capital gains occuring.
- pontifier 8y ago
  It's overvalued because a bunch of people bought stuff when it wasn't overvalued and charge as much as they can for rent. High rents mean high resale value. You're probably paying 2% or more of the original purchase price every month. The prices will go up until it is not economical to buy anymore.

RhysU 8y ago

> Their strategy bodes the disappearance of those quirky restaurants, curious antique shops, and any coffee shops that aren’t publicly traded on the NYSE. Curiously pro-linked markets given that SBUX lists on Nasdaq.