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Even before WFH commercial real estate, particularly office real estate, has the ‘pressure valve’ of a move to the suburbs. Sure, Goldman Sachs isn’t going to relocate its trading floor and Vogue isn’t going to relocate its editorial team to Long Island or Jersey City, but the marginal finance or law firm back office, mid level accounting firm, healthcare provider, insurance company, tech firm, state or municipal (or federal) government office, or medium to large sized corporate headquarters can move out to either Jersey or LI city, or to one of the countless super cheap strip mall offices all around the further reaches of the outer boroughs and the more distant suburbs that are still within commuting and driving distance. This limits price increases for office space in Manhattan to some extent. Many employees may even already live nearer these places and so support this kind of move.
By contrast the residential real estate dynamics are different because of zoning. A lot of housing around cheap suburban office parks on Long Island is super expensive because it’s single family zoned for wealthy PMC in the burbs of one of the richest cities in the world. There’s also far greater sentimentality attached to residential real estate by residents obviously.
Goldman Sachs in fact did relocate a lot of its less-prestigious jobs to Jersey City.
There's plenty of dense-zoned land on the New Jersey side. Even the more desirable stuff (Hoboken, Paulus Hook, Grove Street, Weehawken) is far less desirable than Manhattan or close-in parts of Brooklyn and Queens, possibly because young single women simply won't cross the Hudson for any reason. The less desirable stuff is less desirable for the usual reasons.
There isn’t really comparable real estate. I went to visit some friends recently and their quintessential rich northern suburb town had (after years of legal issues preceding construction) a new generic apartment building with probably a few dozen units. A) The prices were still very high, maybe 20-30% below semi-prime Manhattan and like half ultra-prime like the West Village for a generic modern apartment and B) this is in a small town where you realistically need a car, have limited amenities, and lack any of the real advantages of living in the outer suburbs like a big backyard, garage, lots of space. If you want those you’re out $2m, probably more in the same place.
If you’re going to live in an apartment you may as well live in NYC, even if it’s somewhat more expensive, whereas companies are more keen for many reasons to shift operations to the suburbs. This building, if I had to guess, was mainly occupied by nurses, medical residents and other moderately-but-not-very highly paid jobs that were actually based locally, or indeed by people who work at IBM HQ which is probably the iconic example of a big northern suburban NY employer.
It’s also one thing to live in a shoebox apartment when most of the people around you do too, it’s another to do so when everyone else is enjoying their expansive suburban lifestyle.
I mentioned several areas with comparable real estate (parts of Jersey City, Hoboken, Weehawken) -- these are not small towns where you need a car, they are dense cities. As for the outer suburbs, they're not $2M you can get that for $1M easy; my own house in an Essex County suburb is probably $750K.
Suburban Westchester is another story, not only is it more expensive but it has the whole of Upper Manhattan, the Bronx, and Yonkers (technically in Westchester) between it and the commercial centers of Manhattan.
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The same is true, and perhaps more so, with residential real estate. Lots of people live in New Jersey; Long Island; Westchester; and even Connecticut -- and work in Manhattan. In fact, it's often easier for a worker to move to the suburbs than it is for a business because mass transit is typically oriented around moving people in and out of the central business districts.
By the way, I once leased space in Manhattan for a business. There was no credit check; no application form; no application fee; no references required. That's almost unheard of for residential real estate. The difference is that as a commercial tenant, if I don't pay rent or otherwise cause problems, it's much easier to get rid of me.
Of course, but because of zoning these properties, while obviously much cheaper than Manhattan on a square foot basis are usually in a format that means they’re not actually ‘cheaper’.
If you move from somewhere where a 2bed apartment is $2m to somewhere where a big 4-5 bed house is $2m you have moved somewhere where per square foot you’re paying much less for property, obviously. But the hypothetical $500k 2 bed apartment in the latter place doesn’t exist, so actual prices for “a residence” are comparable.
In many of the wealthiest coastal American (and beyond) cities zoning restricts high density suburban development which creates the affordability crisis.
You can rent an extremely expensive apartment in San Francisco or live in the extremely expensive Bay Area suburbs. It’s not like Menlo Park or Atherton will allow construction of large apartment buildings, so the ‘per residence’ cost is comparable to the richest parts of the city, you just get a larger residence.
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