Title: JPMorgan Chase’s $3 Billion NYC Skyscraper Investment Questioned by Top Analyst
Date: Oct. 22, 2023
Author: Steve Cuozzo
JPMorgan Chase’s plans to construct a new headquarters skyscraper at 270 Park Ave in New York City are being questioned by a top analyst within the bank’s asset and wealth management division. Michael Cembalest, chairman of market and investment strategy for JPMorgan Asset & Wealth Management, conducted a “forensic analysis” comparing the economic and real estate prospects of various US cities.
In this surprising analysis, New York City was found to rank behind 18 other cities, including Boston, Seattle, and even Boise, Idaho. The city only outperformed Chicago, Detroit, and San Francisco in terms of post-COVID 19 conditions such as downtown recovery, office vacancy, household tax rates, out-migration, violent crime, and municipal fiscal health.
Cembalest, a native New Yorker who has been writing the bank’s “Eye on the Market” reports since 2005, conducted the study at the request of a client CEO. He goes on to recommend that companies should be cautious about investing too much in New York City, suggesting that they treat it as they would a megacap stock in a diversified portfolio.
While Cembalest acknowledges New York City’s unique advantages, such as its size, business-sector diversification, global financial dominance, total employment, and lower crime rate, he points out the weak economic recovery since 2019, structural problems related to business conditions, and poor fiscal health that are dragging the city down.
The study specifically highlights several concerns, including the unsustainable mass-transit use at only 73% of pre-COVID levels, the highest office vacancy rate since the early 1990s at 18%, limited effectiveness of office-to-residential conversions, burdensome zoning restrictions, and the negative impact of the asylum influx on the city’s financial situation.
When asked about the bank’s investment in the new headquarters building and whether they regretted the amount spent in light of Cembalest’s findings, JPMorgan spokesman Michael Fusco stated that New York City has been their home for over 200 years, and they contribute significantly to the local economy. He emphasized that the bank is building for future generations of workers and making a long-term investment in the city.
Despite JPMorgan’s commitment to New York City, Cembalest’s analysis raises serious questions about the city’s desirability for corporate and real estate investment. With the current challenges facing the city, including high office vacancies and a weak economic recovery, companies may need to reconsider their concentration in New York City and explore alternative markets with more favorable conditions.