The NumbersWhile cities like Los Angeles and San Francisco have seen their real estate prices decline more than 40% from their bubble highs, prices in Manhattan have taken a significantly smaller hit. Miller Samuel reports that the peak price per square foot was $996 in the third quarter of 2009, vs. $1,289 in the first quarter of 2008. That represents a decline of only 23%. Third-quarter 2009 data show prices declined at a lower rate while transaction volume surged 46%, a sign that the Manhattan market is starting to find its bottom. I expect it to decline another 10% with an eventual U-shaped recovery. But the duration and the magnitude of the decline have been less than for comparable major cities. Wall Street firms are expected to pay a record $140 billion in bonuses this year because of the resurgent stock market, an easing in credit markets, an increase in dealmaking and government programs, according to The Wall Street Journal. This is despite the recession and despite an unemployment rate of 10.3% in New York City. Regardless of whether these bankers deserve their lavish bonuses, one thing's certain: Their payday will boost Manhattan real estate prices.
LandlockedManhattan is a landlocked island. While developers in most cities keep expanding outward, developers in Manhattan do not have this alternative. Yes, we can expand upwards, but with the city's stringent regulations, it is easier said than done.
Capital of the WorldManhattan is a global must-see destination. Emerging markets like Brazil and China are creating wealth at a very high rate and churning out millionaires. New York is often the first international destination these new millionaires from emerging countries want to visit. It's also one of the first places where they want to buy investment property or a pied-a-terre.
Diversity of IndustriesWhile finance has been the dominant industry in New York, the economic landscape is diverse. Besides finance, New York has media, hospitality, advertising and professional services like law and accounting firms. These industries will be serving emerging-market economies and will benefit the local New York economy in terms of job creation and housing demand. The city's unemployment rate was at 10.3% in August. If not for the diversity of the current New York City economy, the unemployment rate would be even higher. Eastern Consolidated reports that the securities industry lost 1,000 jobs in August and has lost a cumulative 31,200 jobs since November 2007. However, sectors like education, health, leisure and hospitality gained jobs, which partly offset the negative impact of the financial job losses.
Quality of LifeThe air in Manhattan is pristine compared to air in other global metropolises like Hong Kong. Transportation, although via a 100-year-old subway system, is still efficient and dramatically reduces commuting time for those living in Manhattan. The legal system is established and there is a better work-life balance compared with countries like China. These are major considerations for attracting global talent.