Opinion

Tale of Two Types of Cities Part II: New York

In Part I of this article, we took London as a case in point to discuss how the world's primary cities and centres of international business and finance have made a significant recovery from the 2008 global financial crisis, continuing to outperform and flourish in all sectors while their secondary, tertiary and regional counterparts suffer the effects of a prolonged economic downturn.

We concluded that although "safe-havenism" was undoubtedly partially responsible for the injection of cash that is being pumped into London´s prime property sector, buoying up prices elsewhere in the capital, it is globalization that is the key driver behind a growing tendency towards the ultra-concentration of wealth in the world's primary cities.  

Casting a glance across the Atlantic, we have chosen New York as the second such example of a primary city that continues to outperform its wider economy across all sectors. Contrary to expert expectation and as expressed by one US economist:   

"One of the biggest surprises of the current recession has been the relatively modest impact the downturn has had on New York City. As the financial capital of a country in the midst of the worst financial crisis since the 1930s, there has been a general expectation that the New York City economy would decline further and faster than the rest of the nation. Yet that has not been the case."

A recent report by Savills gives credence to the continued ebullience of New York's economy despite the hardship being endured elsewhere state-wide, concluding that:

"As a stable, high quality, established and cosmopolitan world financial and cultural centre, New York is looking exceptionally good value at present. New York, as a global city, has outperformed the national average over the same period."

New York's Property Market buoyant across all sectors

On the property front in particular, prices in the world's top cities (the London's and New York's) have continued to go from strength to strength when compared to the still downward-sliding or stagnant property market conditions that continue to prevail in the remaining regions of their respective countries. 

In the residential sector, as in London, home prices in New York are much higher than elsewhere in the country and continue to climb despite the generally depressed market afflicting the rest of the country.

By means of stark example, according to real estate website Trulia.com, the average price of a home in New York City currently stands at $1306 per square foot, compared to Texas at $72 per square foot.

It is common knowledge that a surge in growth in the multi-family home development sector (apartment blocks) fuelled by an increase in demand for rental accommodation in the US, is the primary reason behind the promising signs of the beginnings of a property market recovery on a national level.  

Yet it is New York that has once again reaped the greatest benefits of this growing demand thus far.

According to Cushman and Wakefield, the greater New York metro area (including Manhattan, the New York City boroughs and Northern New Jersey) accounted for nearly 50% of the $3 billion national mid/high-rise transaction volume recorded in 2010.

Despite the budding confidence in the wider US housing market, New York City housing prices continue to rise at a much faster rate than those in other states.

Illustrating this fact, the S&P/Case-Shiller Home Price Indices showed that the national composite was up 1.2% in the second quarter of 2012 compared to the second quarter of 2011. In comparison, a recently released report by the Real Estate Board of New York recorded a 6% year-on-year rise in property prices city-wide in the second quarter of 2012. According to this report, home sales in the city are "stable and steady", yet a further indicator of on-going demand.

The office sector in New York is also outperforming by a large margin. Indeed, Manhattan has the lowest vacancy rates in the US in both the downtown and metropolitan indices measured by CBRE USA:

US Office Market - Lowest Vacancy Rates

As previously touched upon in Part I of this article, London has profited from the flight to safety by the world's affluent.

When it comes to comparing both London and New York, while both cities are home to some of the most expensive properties in the world, it could be argued that London rather than the Big Apple is taking slightly more of the lion's share with regards to property investment motivated by safe-havenism.

A forerunner of the global super-cities of the future

It could be argued that New York has historically been one step ahead of London and other established primary cities, as a result of globalization.

Long acting as the gateway for thousands in search of the American Dream, New York continues to promise and deliver upon and the opportunities that abound for the ambitious and the talented. Irrespective of nationality, New York has been and continues to be one of the most attractive career goalpost destinations.

Like the City of London, New York's Wall Street is at the heart of the global economic infrastructure. As well as being the central base of hundreds of national corporations, New York is also an established international centre of finance, trade, telecommunications, manufacturing, media and entertainment. More Fortune 500 and 1000 companies have their headquarters in New York than anywhere else in America. This includes 8 of the world's top ten securities firms and circa two-fifths of the country's 50 leading law firms as well as 219 banks representing every major country.

However, New York's wealth-engendering resources and opportunities are not limited to the abovementioned already all-embracing sectors.  The city's biggest industry is publishing and New York has more printing plants than anywhere else in the United States, employing more than 13,000 people.

In recent years, the high-tech and "new media" industries have taken a $9.2 billion toehold in the city, particularly in what is being termed Silicon Alley - Upper Manhattan, Brooklyn, Queens, and Staten Island. Likewise life science R&D has witnessed similar growth in recent years with at least 3 of the world's leading pharmaceutical companies making their headquarters in Midtown Manhattan.

American actor/writer Spalding Grey once said "I knew I couldn't live in America and I wasn't ready to move to Europe so I moved to an island off the coast of America - New York City."

Money begets money; power begets power; and as the effects of globalization outlined in our previous article, continue to create their self-perpetuating cycle of wealth concentration in the New Yorks and Londons of this world; these super-cities that function as separate "islands" to the rest of the country to which they geographically belong, insulated from the local economy, look set to become the global norm for the foreseeable future.

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