New York City, according to a newly released report from state comptroller Tom DiNapoli, is “the world’s premier office market.” That’s no idle boast. The three Manhattan office districts (Midtown, Midtown South and Downtown) alone have about 450 million square feet of office space, “more than any other city in the world.” That’s more than Chicago, Washington D.C., Boston, San Francisco and Seattle combined. The three districts account for 29 percent of all the office space in the nation’s business districts. The rest of New York City contributes an additional 100 million square feet of office space.
With New York City adding more than 620,000 jobs since the end of the Great Recession, DiNapoli says, New York City-based office employment has increased by 202,000 to 1.5 million, or about a third of all jobs in the city.
Two supersectors, business services and technology, advertising, media and information (TAMI), were responsible for 911,000 office jobs, or 59 percent of the total, according to DiNapoli. Since 2009, these sectors have added 176,000 jobs, two-thirds of all the growth in New York City’s office jobs.
In 2011 a study in the Journal of Economic Geography by Matthew Drennan and Hugh Kelly tried to measure the degree to which the clustering of office-based professions allowed higher office rents. Measuring 49 large urban areas, they concluded that the benefits of concentration (agglomeration) were realized in business districts in larger but not smaller metropolitan office markets, and not in suburban office markets.
Economic theory and economic practice come to the same conclusion: bigger office markets get bigger and attract greater market share.
End of story? No, just the beginning. It’s more complicated than that. Much more complicated.
It’s widely known that cities reliant on manufacturing, like Detroit and Cleveland, have been in decline. Cities that specialized in idea production, like New York and San Francisco, have flourished. “With future improvements in information technology, there is every reason to think that the free flow of people and capital across space will only continue to increase the returns to new ideas,” wrote economists Ed Glaeser and Giacomo Ponzetto in a 2007 research paper intriguingly entitled Did The Death of Distance Hurt Detroit and Help New York? “The important question for the future of cities is whether urban areas will continue to have a comparative advantage in producing ideas.”
There’s the possibility that idea people can and will leave dense agglomerations. Knowledge workers can locate near other innovative people in varied venues. But why would they want to gather anywhere but in places like Gotham?
Because Gotham’s a very expensive place to live and a very expensive place to work.
Here’s the remarkable conclusion drawn by Richard Florida from a 2015 analysis by economists Chang-Tai Hsieh and Enrico Moretti: “Even though superstar metros like New York, San Francisco and San Jose created great wealth in sectors like finance and high-tech, nearly all of the gains were eaten up by the wages used to pay for higher housing costs.”
Greater New York was singlehandedly responsible for twelve percent of the nation’s output growth from 1964 to 2009, but that figure falls to less than five percent when housing costs are taken into account. “Too much of America’s urban economic power is simply being wasted on higher housing bills.” Improving transit habits (commuting) ameliorates urban problems to some degree, concedes Florida. But Hsieh and Moretti’s study “reminds us of the enormous costs of trying to run the powerful, highly clustered new economy on the platform of our outmoded suburban, industrial model.”
What might this opportunity — and it is a huge opportunity — mean for the Hudson Valley, which still has to compete with every other place that wants its piece of the “highly clustered new economy?” Well, first of all it requires imagination and intelligence from the region’s leaders and entrepreneurs. When it comes to the application of those qualities to social organization, I regret to say, intelligence has been in short supply.
The federal government needs a more coherent urban policy, say the economic experts. Given what’s happening in Washington, good luck with that one.
State government, which treats the Hudson Valley as part of the upstate Rust Belt, isn’t as much help as it should be. No one can be in favor of upstate disinvestment, but the fact is that the Hudson Valley’s propinquity to Gotham is a competitive advantage that only Long Island can boast (and the fact that region has become a vast suburbia is not to its advantage). Extending New York City’s economic power northward to the Hudson Valley without sprawl would be a strength for the state’s ambitions for economic development. That should be a more important part of the state’s strategy than it has been.
For significant portions of the Gotham economy, the Hudson Valley could be the most productive location in the state. Which portions? In their eagerness to improve the Hudson Valley economy, leadership at all levels grasps too greedily at straws. Film, food and hospitality seem the fads at present.
Those are indeed promising industries, but the world of business services and TAMI, where DiNapoli says Gotham is the strongest, constitute a very large bucket indeed. Economic development requires constant analysis of opportunities. We live in a free-market economy. What are the entrepreneurs and venture-capital folks thinking? What’s the next potential knowledge cluster? Look carefully before you leap. Prepare before you jump.
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