Now and again I ask readers for input on what they are seeing locally, a sort of regional check on the statistics and media reports on how the economy is faring.
I’ve seen some things in my backyard that have me puzzled and wondered if readers see similar patterns.
On the one hand, New York City should be faring better than the country overall. It’s dominated by finance, which benefits from ZIRP. Wall Street had a decent bonus year last year and both bonuses and staffing levels are forecast to rise this year. The real estate market here is smoking, due at least in part, I’m told, to Russians and other foreign buyers being leery of property markets in the Eurozone, and so New York is high on a shorter-than-ever list of places to buy.
Yet…I have never seen so many vacant retail stores in my neighborhood, even in the worst of the crisis. And the pattern isn’t the “all storefronts for one building vacant” sort, which means a building is slotted for demolition or a major makeover. And some long-established local mini-chains have gone bankrupt.
Now it might be that the staid Upper East Side is losing out big time to the hipper parts of the city. But I asked a buddy who is in real estate and whose wife runs a store. He says her business is just hanging on this year, and he’s not clear if she will make it. And it’s partly due to the rents. He said a lot of landlords gave tenants breaks during the crisis so as not to put them out of business. But now that the economy is supposedly better, they aren’t cutting commercial tenants any slack, and are putting through increases (note I’m not clear on the level of increase, and wonder if they are also largish, either due to looking at how the residential purchase market is doing and suffering from profit envy, or coming to close to the same place by trying to put through what they feel are past-due rent increases all at once). Given how many stores I’ve seen vacant for more than a month or two (these in good locations, like nice blocks on Madison, Lex, and Third), this strategy does not look so smart.
Another weird tidbit: I took a cab to the airport in May and chatted up the driver, and asked how his business was. It turns out he owned a limo but was no longer driving it. He said he used to be able to make $800 to $1200 a day driving the limo, but now he’d be lucky to pull in $150 to $200 regularly, while he could earn $200 to $300 a day driving his cab. He’d had a contract with a large fund management company (I recognized the name) among others, and after the crisis, they kept squeezing on fee levels until it didn’t make sense to work for them. And the sort of casual business he’d get, that of being hired for a few hours by someone who wanted to do a lot of shopping, or go to dinner and theater, or pick up a client from the airport, had never recovered. This of course is the opposite of what I expected given that the official data shows that all of the income gains in the recovery have gone to the top 1%, to the degree that the rest of us are a bit worse off.
Do you see any local cross currents? Can you make sense of them?