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Pastimes : Is a Real Estate Downturn Coming? -- Ignore unavailable to you. Want to Upgrade?

To: SouthFloridaGuy who wrote (42)	6/26/2001 5:00:30 PM
From: $Mogul	Respond to of 91

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.''