Wall Street Cutbacks Taking a Toll on New York City's Economy
Wall Street Cutbacks Taking a Toll on New York City's Economy
New York, June 26 (Bloomberg) -- Cutbacks at Merrill Lynch &
Co. and other Wall Street firms are depressing New York's real
estate prices, draining the city's tax revenue and putting a
damper on entertainment spending.
Sales of Upper East Side apartments for $5 million or more
have fallen to half of last year's pace, office rents have
declined five months in a row, and restaurateurs say customers
have become more cost conscious as investment banks react to
falling trading revenue by cutting jobs and other expenses.
``An awful lot of customers who were flying high last year
are not now with the market being down,'' said Tom Sheridan, a
manager at the Smith and Wollensky steak house on Manhattan's East
Side. One indication of a more frugal clientele, he said, was an
``enormous response'' to a recent $21.21 lunch special at the
restaurant, where dinners average $56.
Goldman Sachs Group, and J.P. Morgan & Chase & Co. are among
the financial firms that have cut a total of almost 20,000 in New
York and elsewhere this year, according to Securities Industry
Association economist Frank Fernandez.
Merrill, the largest U.S. brokerage, said today that it has
cut 3,800 positions and would slash more jobs if business doesn't
pick up.
Wall Street firms provide about 184,000 jobs in the city,
according to the Securities Industry Association. Banking and
finance firms also accounted for 24 percent of office leasing in
Manhattan last year, according to Insignia/ESG.
The New York City Mayor's Office has forecast a 12 percent
decline in personal income tax revenue next year because of an
expected 75 percent decline in Wall Street profits, to $5.1
billion in 2001 from a record $21 billion in 2000.
Fewer Bidding Wars
As investment banks cut back, bidding wars over apartments
have become less frequent with the market decline, said Paul
Purcell, chief operating officer of Douglas Elliman, the largest
residential broker in New York City.
Purcell said the financial industry accounts for as much as
30 percent of the firm's clients. Elliman, a unit of Insignia
Financial Group, has seen its property sales decline 11 percent
from last year's pace.
The impact is most pronounced for Upper East Side homes
priced at $5 million or more, said Pamela Liebman, president and
chief executive of the Corcoran Group. Though overall sales are up
by as much as 35 percent over last year, sales are off by 50
percent in the highest price range and by 18 percent for homes
priced between $2.5 million and $5 million.
``Drop offs of this nature haven't been seen since the early
1990s,'' she said. ``There's certainly some concern among (Wall
Street workers) about job security and bonuses. A lot who had the
ability to purchase at the high end last year can't right now.''
Wall Street firms have also postponed some plans to expand.
Goldman Sachs Group, for example, canceled plans for a new trading
floor on Water Street and J.P. Morgan Chase & Co. is among tenants
putting space up for sublease.
``In 30 years, I have never seen so much of a change in six
months -- like a fall off Mount Everest,'' said Robert
Billingsley, executive vice president of commercial brokerage firm
Colliers ABR.
Corporate entertaining is also down, according to Mark
Magnotta, general manager of the American Place restaurant at the
Benjamin hotel on Lexington Avenue.
``The banquet space has fallen off a bit,'' he said. ``People
are having smaller events.'' |
