JPMorgan Chase is spending an estimated $3 billion to erect a new headquarters skyscraper at 270 Park Ave. But according to a top analyst in the bank’s own asset and wealth management division, companies should think twice about investing too much in New York City.
The Big Apple ranks behind 18 other US cities — including such second-tier markets as Boston, Seattle and even lowly Boise, Idaho — in a bombshell “forensic analysis” of the towns’ economic and real estate prospects by Michael Cembalest, chairman of market and investment strategy for JPMorgan Asset & Wealth Management.
New York bested only shooting-gallery Chicago, depressed Detroit and empty-offices capital San Francisco in an aggregate ranking of the cities’ post-COVID 19 conditions — such as strength of downtown recovery, office vacancy, household tax rates, out-migration, violent crime and municipal fiscal health.
Cembalest — a native New Yorker who’s written his division’s “Eye on the Market” reports since 2005 — did the study at the request of a client CEO.
He recommended that his clients treat New York “the way an asset manager might treat a megacap stock in a diversified portfolio … the risks argue against too much concentration for corporate or real estate entities.”
He cites Gotham’s “unique advantages” of its overall size, business-sector diversification, global financial-sector dominance, total employment and lower serious crime rate than in other cities (“which sometimes comes as a surprise.”)
Despite these strengths, New York City “is dragged down by a weak economic recovery since 2019, structural problems related to its business conditions and poor fiscal health.”
He specifically notes:
- Current mass-transit use at 73% of 2019 levels is “unsustainable given required capital and operating costs.”
- Office vacancy of 18% is the highest since the early 1990s.
- Office to residential conversions “are unlikely to materially reduce the stock of underutilized office space given cost and complexity.”
- “Zoning restrictions are particularly burdensome at a time when flexibility is paramount in a post-COVID world.”
- “The asylum influx threatens to substantially impair the city’s financial situation” at a time when it needs to substantially re-invest” in infrastructure and housing.
Asked whether the bank had any regrets about how much it’s spending on its new headquarters in light of Cembalest’s findings, JPMorgan spokesman Michael Fusco said:
“New York City has been our home for more than 200 years and we contribute significantly to the local economy as one of the city’s largest employers. We are building for future generations of workers and making a long-term investment in New York.”