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September 23, 2008

Brooklyn's Financial Class and the Condo Boom

keap%3Aainslie_0908.jpg
That's the subject of a NY Observer piece, which asks what effect Wall Street's downturn will have on the portion of our population that works in the financial industry, and thus our high-end housing boom; those are the folks responsible for snatching up a lot of the inventory, apparently. "Brooklyn may not be where the top executives or VPs live," worries one financial industry worker, "but a ton of back office employees live in the borough and will be out of jobs." Still, the article assumes a relatively optimistic tone. Brooklyn is still a bigger bargain than Manhattan; contractors still maintain a backlog of work; big projects have a long enough time line that the economy could pop back up by the time they get to the offering phase. And apparently we've learned our lessons from the city's last serious downward spiral. As one fellow put it, "I can't see New York going into this huge kind of 1970s-city-going-to-shit type of thing."
Wall Street Views From Another Bank [NY Observer]
Keap/Ainslie. Photo by kenyee.

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That quote about VPs is weird. Most VPs are in the early-30s and the mid-range earners on Wall Street. I think a lot of those people are the buyers of these new condo projects, especially in Williamsburg and Downtown Brooklyn.

Posted by: lowintheheights at September 23, 2008 9:47 AM

"I can't see New York going into this huge kind of 1970s-city-going-to-shit type of thing."

Hold my hand. I'll walk you to the optometrist. You are suffering from glaucoma and need help right away.

Posted by: DOW8000SP800 at September 23, 2008 9:49 AM

...better yet, put down the pipe and burn some trees.

Posted by: DOW8000SP800 at September 23, 2008 9:52 AM

so who is buying these million dollar condos in Brooklyn if not the VP's? The secretarial staff? Honestly some of the things written in la-la papers such as the Observer are not worth reading. Such ignorance of things they should understand better.

Posted by: sam at September 23, 2008 10:04 AM

Yeah I am sure that the melt down of our countries financial institutions (wall st) - which is anticipated to wreck havoc on the entire planet will only be a small blip here in Brooklyn even though we are only 1mi from the epicenter, have thousands of people directly employed within the industry, rent a large portion of our office buildings to these very companies and where a huge portion of our city and state tax revenues are derived from said industry......

Posted by: fsrg at September 23, 2008 10:18 AM

denial is a beautiful thing....

Posted by: Dora Chica at September 23, 2008 10:21 AM

Some of you are really naive if you think the only people buying condos these days are in the financial sector.

Most of my friends have bought within the last few years (mostly Williamsburg, Downtown and Park Slope) and only one I can think of works in the financial industry....for a hedge fun where he is still dutifully employed and paid cash for his place, as most of these guys did.

It won't take much to find a new job which pays the maintenance and taxes on these places, many of which were paid for in all cash.

Posted by: 11217 at September 23, 2008 10:49 AM

11217 - you yourself are so weirdly naive if you think this meltdown in the financial industry won't effect other industries. I'll spell it out for you: advertising (which obviously effects tv and print media), movies (no more wall street financing), interior design and architecture (employed by finance people), public services (education etc - huge cuts from losses in tax revenue) etc etc etc.

Posted by: gkw at September 23, 2008 11:45 AM

I totally understand the severity of the crisis, gkw. It's really, really bad.

But people like you who are unable to look at the big picture are the same people that tried to scare everyone into Iraq also.

Try to understand that this is not the end of the world. The finance industry will lose 64,000 jobs in NYC over the next few years. We will survive and go on, just like they did after the Great Depression.

And even become a better country for it in the end, if all goes well.

Posted by: 11217 at September 23, 2008 12:00 PM

"We will survive and go on, just like they did after the Great Depression."

Problem is, we don't get to fast-forward through this mess. We actually have to live through it. Slow death, slow resurrection. Not a piece of cake.

Posted by: DOW8000SP800 at September 23, 2008 1:11 PM

11217, How exactly is the the thinking that the financial criss willd affect Brooklyn RE in any way similar to supporting the war in Iraq??? I am baffled.

The point everyone is making is that the crisis on Wall Street is far broader than 64,000 jobs. Who pays 1/3 of the lawyers in NYC? Wall street. Who pays a third of the advertising agencies? Wall street? Who buys a third of the food? Wall Street? Who builds a third of the buildings and hires a third of the architects? Who hires a third of the graphic designers? Who hires a third of the tech people?

Posted by: shillstoner at September 23, 2008 1:12 PM

11217, How exactly is the the thinking that the financial criss willd affect Brooklyn RE in any way similar to supporting the war in Iraq??? I am baffled.

Posted by: shillstoner at September 23, 2008 1:13 PM

How does Wall Street pay one third of advertising? Tombstones in papers are not worth that much, and I see very little advertising of Goldman, Alliance Bersntein or American Funds in print or TV. How Can Wall Street buy one third of the food when they comprise less than 10% of population? Everybody eats.

Posted by: DeLepp at September 23, 2008 1:48 PM

As far as I know, Wall Street jobs (all of them!) make up 30% of the tax revenue for the city.

That does not, however translate into them hiring 1/3 of all of the various industries you cited. That's a total jump to conclusions, which are not based in fact.

And you are basing this on every single person on Wall Street being let go?? You would have to, to cite the 1/3 argument.

Your assumptions and over-the-top assertions are not needed in a time in which panic could potentially topple this country.

16% of the Wall Street workers are expected to lose their jobs in the coming years. Not the entire 300,000 people.

Try to use some facts in your end of the world scenarios, if you can.

Posted by: 11217 at September 23, 2008 1:48 PM

We still have some important sectors of the economy that won't be decimated by the crashing financial markets. Advertising is more based on the pharmaceuticals. Tourists will still flock here to take advantage of the weak dollar

What neither the Observer or any of the commenters mention here is that credit is tightening again, and that could mean that some projects could easily collapse. The Atlantic Yards proposal is just the most obvious example of a project that relies on a more favorable credit market.

"Your assumptions and over-the-top assertions are not needed in a time in which panic could potentially topple this country."

Luckily, I don't think Paulson or Bernanke care what we say, so I think we can muddle through a conversation here without fear of toppling our country.

Posted by: harriet at September 23, 2008 4:06 PM

9:47am - i believe that williamsburg has few if any financial industry condo owners. those guys stay in the city and then get married and move to New Jersey. i think that purchasers in williamsburg are creatives or artists, biz professionals related to creative industries, entrepreneurs, store, restaurant and bar owners, media people and some hip lawyers. met also a few real estate people. almost everyone i know that owns is married and most have kids. not meeting any single finance guys that own at all.

can't speak for downtown brooklyn, but the one guy i know that bought there is an ad agency creative who's married, in his 30's and has a toddler.

Posted by: wine lover at September 23, 2008 4:45 PM

Sorry, I was in meetings all day. So to respond:

I didn't say that all wall streeters would be let go--I said that Wall Street accounts for 1/3 of the pay in this city. Which is a fact. And which does indeed translate into them accounting for 1/3 of the money that gets spent throughout the city. Wall street money has a massive impact on every sector of the city's economy.

Posted by: shillstoner at September 23, 2008 5:54 PM

I think the sad truth is, that the thing called "Wall Street": traders and buyers shouting and bargaining in each other's face, is obsolete.
Rich people like space, they like cars, they like their private pools and private tennis courts, they want their children to be sheltered from the less attractive side of life. It makes no sense for these people to work in New York. This is a socialist-leaning, public-transit, goo-goo, egalatarian, politically correct archiapelego. I am amazed Wall Street stuck it out as long as it did. I guess it was the infrastrucutre (and the opportunity to keep a mistress in town). But now, things are changing. Technology is freeing people up from working in crowded, distant, downtown sectors that they hate going to. Keeping a mistress is no longer de riguer, except for middle-aged politicians, and working closer to home is actually more environmentally friendly. I don't know what will happen to the NYC economy once Wall Street vanishes and moves to cyberspace, I think actually it has already happened, but I'm sure we will think of something. Although whatever it is, we will need more parking and lower taxes.

Posted by: sam at September 23, 2008 7:23 PM

"Rich people like space, they like cars, they like their private pools and private tennis courts, they want their children to be sheltered from the less attractive side of life. It makes no sense for these people to work in New York. This is a socialist-leaning, public-transit, goo-goo, egalatarian, politically correct archiapelego."

Right now I'm working late in Midtown, and I've worked at tons of financial and other highly capitalized firms. Most of the people in these firms live in New York, Connecticut and New Jersey, which seem to match your vision of the most "socialist-leaning, politically-correct" states in the country.

Sorry to disappoint you, sam, but rich people love this town.

Posted by: harriet at September 23, 2008 7:56 PM

Harriet,
Most people working on Wall Street live outside the five boroughs. There are certain categories of rich people who like to live here but they are not usually in the financial sector, except perhaps for singles just starting out who like the bars and the easy sex. Listen, "Sex in the City" sells. No one is underestimaning the sexual component of city life, that is why I mentioned the whole "mistress" culture", which Americans dismiss as a foreign concept, not at all relevant to our saintly, puritan shores (they are wrong!)
I do believe that once folks settle down and are married happily, and start having kids, the last place in the world they want to be is NYC, unless they are a little eccentric or narcissistic. that's what i think, you may disagree, I base my views on my real life observations, you may be much richer and more priviliged than me.

Posted by: sam at September 23, 2008 8:24 PM

Thank you Harriet for your earlier comment. You failed to qualifying your latest one though: "rich" may love this town, but they are not spending 95% of their income here? They may love it and live here but depending on their income, they may be spending a small percentage of their income compared to many of us out here in the land of relative "genteel poverty", the shrinking middle class and the working poor.

Sam, you made me giggle a little with your comment.

But honestly, remember, if 1/3 of the money (in the above ground economy) is supposedly being paid out (and how do we calculate compensation when a salary is $2m and the rest is in stock options?) to individuals who work in the finance industry, a lot of that is being socked away and NEVER enters the local economy.

Yes, there are many service businesses that rely on the mid-level (and even high level) salaried individuals in the finance industry that are facing this slowdown. I had noticed quite a number of months ago that the crowds at certain places and people circulating around in parts of Manhattan that two (nay, even one) year ago were busting at the seams with revelers of one sort or another had diminished amazingly. There is a slowdown. Part of this slowdown a bunch of months ago may have been the skittishness of the moment, a bit of fear, not actually due to any layoffs at that time. This is just my impression, but lots of posh-ish restaurants and other services that rode the wave since 2001-2 MUST be feeling it right now, no? Then again, weekends it can still be crowded at these restaurants…I guess we’ll be drinking champagne as the plague comes knocking at the city gates.

Goodness knows, the high-end catering companies for business events are probably taking a huge blow. ...I wonder how company holiday parties will be this year...I’d love to see a report on this come January.

Just remember, the upper echalons of NYC money are diversified, and those earning 8 figures and up do not dump all their earnings into the local economy. I would love to see a study done on this as well.

A family of 3 or 4 with a total household gross income of $40K is spending their entire income and then some. The same family making $150K is probably also spending nearly everything (and then some!), the biggest single piece being mortgage payments, no?

A family bringing in $5m (McCain's magic middle class threshold), $12m, $30m is spending a LOT of money in NYC, yes, but probably a much lower percentage than the family at a much lower income level...unless they're nuts and trying desperately to keep up with the Jones...which happens a lot, granted.

Actually, I shouldn’t include the $5m in there. That should be lumped with those earning $3m. That’s another level way below the people in the tens of millions per annum.

Is it my imagination or does high-end housing seem to have thresholds? There are those affording $5-10m abodes and then the $25-40m range with not much in between. There are homes/apartments in all price ranges but, there seems to me to be a bulk in that midrange Manhattan/BH "expensive" range and then not much...the next level is the really pricy homes up in the stratosphere. Disclaimer: this is NOT scientific!

Conclusion (to this anecdote):
Just because 1/3 of the estimated above ground economy seems is being paid to employees of the financial industry, 1/3 of those salaries are NOT being spent in NYC. The 2/3 of salaries going to John and Jane Q. Public get spent at much higher levels.

But, alas, there is the ripple effect of any money that shrinks from the economy...in this case, who can guess right now what the real number of jobs and actual cut to payrolls will occur in the financial sector. There will be businesses that rely on this sector that will be feeling the crunch and have a multiplier effect.

Posted by: BrooklynGreene at September 23, 2008 8:26 PM

11217- I like your optimism. But I think America is about to undergo a fundamental change. Even after the Depression, we had the threat of Fascism and then WW2 within the same decade.

Posted by: newbie12222 at September 24, 2008 12:35 PM

« The Borough of Mom and Pop Shops Pop Quiz: Including Homeowners in the Bailout? »

September 23, 2008

Brooklyn's Financial Class and the Condo Boom

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