Beginning Friday March 20, 2020, Manhattan entered a period of shutdown and isolation unlike anything experienced before. This unprecedented action was taken to slow the spread of COVID-19 as it continues to upend life across the globe. Shops and restaurants closed, non-essential businesses moved to remote working, and office buildings became virtually empty across the city.
Now, nearly three weeks in, it is almost impossible to believe that just prior to current events, the U.S. economy was fundamentally at its strongest coming into the beginning of this year. Unemployment remained at historical lows (3.5%), an estimated 50,000 jobs were added to the economy in the first week of March, and we were enjoying one of the most prolonged economic recoveries in U.S. history, an expansion that started in mid-2009. The S&P 500 index peaked at 3,386 on February 19, 2020 and it has been almost 12 years since the collapse of Lehman Brothers and the ensuing financial crisis. Many were wondering what event would reverse one of the longest-sustained economic growth cycles in U.S. History. Needless to say, few saw this coming.
In one week, everything changed. Hiring stopped, many employees were furloughed, and a record 3.3 million workers filed for unemployment during the week of March 16th, the largest jump in jobless claims in history.
Nobody knows the extent of the impact that COVID-19 will ultimately have on the mid and long-term health of the New York City commercial real estate market. We do know there will be significant disruption and can only look to previous downturn scenarios for a glimpse of what could be in store given historical trends and correlations. History has shown these downturns tend to be quite favorable to tenants.