New York City could be the new tech mecca, thanks to Google
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They completely ignore the growing startup scene in New York - Silicon Alley, Digital Dumbo[1] - and latch on instead to a story about a huge, already established company that's buying a building they already have 2000+ employees in.
Tech meccas are born from hundreds of small technology companies constantly pushing the limits of a platform, not from the presence of a single, large employer.
I would think having a few large tech companies in an area would aid in the creation of smaller ones.
For instance, there are a lot of ex-Amazon employees doing startups in SF now. There's a reason they left Seattle, and it's not entirely due to the crappy weather.
Necessary but not sufficient conditions. A bunch of big companies by themselves do not make a viable startup ecosystem. A startup ecosystem without the big companies won't get off the ground, though.
Anton says once Google buys the building, businesses will clamor to get in, if only for a chance to make that elevator pitch to CEO Eric Schmidt
Quite a bit of hyperbole here. The building already has lots of big companies as tenants http://www.111eighth.com/
Preferably one with a volcano, because geothermal is so hot these days.
Boss: Want to go to New Jersey to see the co-lo facility?
Me: Why? To visit my rack?
(My original answer to his question wasn't nearly as impressive.)
I also have servers at that location, and in fact I did ask the ISP for a tour so I could see my rack during one of my recent visits to NYC.
If the city wised up and killed rent control, ``scarce office and employee living space'' wouldn't be an issue.
What would happen if only rich people could afford to live in New York? Gee, I dunno, probably about the same thing that happens when only rich people can afford to live in Beverly Hills.
Exhibit A, NYC: The most populous city in the US with the highest density and having the highest economic output. It is considered the world capital for finance and is a world cultural center for fashion, media, art, theater, food, and music. More people live in the city limits of NYC than 40 of the 52 states.
Exhibit B, Beverly Hills: An affluent bedroom community with around 30,000 residents and a suburb of Los Angeles.
The low-paid jobs which do need to be done in Manhattan can easily be done by people commuting in from New Jersey.
I'm actually not sure about the outer boroughs, I've never actually been there (that sounds snobbier than it is, I've only been to NYC twice). It seems to me that gentrifying the outer boroughs should be one of the great challenges facing New York City.
When the price of some good is artificially capped below the market equilibrium price, a shortage always occurs.
Rent control benefits some people at the expense of harming a larger number of people.
So, economists loves to look at situations like NY rent control and pass judgement, but it's just a much more complex situation than that, even beyond the moral implications of kicking grandma out. I used to think the way you did and was skeptical of rent control, but research has led me to understand it, at least somewhat. The Wikipedia article has some good insight into why it's helpful from an economic point of view.
It seems to me that you're neglecting the economic reality that, were rent control dropped, landlords would be buying up land within the city left and right. Since price ceilings wouldn't be inhibiting profit potential and introducing negative incentives into maintaining apartments, opening apartment buildings would be an extremely attractive investment. The market would be flooded with new dwellings. Thus, should rent control be killed, a natural market equilibrium would be sought, the middle class could again reasonably live in NYC, and the city itself would bloom.
Modern rent control laws only really prevent the landlord from raising rent (EDIT: more than a certain percentage every year) on existing tenants. This is considered "rent stabilized," which covers almost half the available units in NYC. Less than 2% of the available rental units in the city area are considered rent controlled, which is where the government actually mandates a certain rent level. The pricing of over a third of the rental units in NYC are unregulated.
How to make money:
1. Buy up a row of those five-storey brownstones which seem to cover most of Manhattan (say, a hundred apartments)
2. Knock 'em down, build a 30-storey tower (say, a thousand apartments)
3. Sell 'em off as condos.
That doesn't sound all that risky to me. In fact, it sounds like a great way to make a crapload of money very quickly and I would happily invest my money in a scheme like this. The fact that there's virtually zero new high-density condos being constructed in NYC means there's some kind of regulation seriously screwing with the system, because high-density construction should happen naturally when medium-density housing gets insanely expensive.
1. Good luck. Brownstones in Manhattan are pretty rare these days, and they're quite expensive, largely because you'll be finding them in the Upper West Side. There are wealthy families who have lived in these for decades and aren't about to move out. In order to compel people to move out and find a new place, you'll have to pay them 2-3x market rate, especially if they get wind that you're a developer, which will work out to be around $15-100 MILLION DOLLARS per building, if we're talking about a decent section of Manhattan. If you're lucky, you'll find someone to finance this operation. It will take you years to do get all of this done. In the mean time, you'll be getting sued by the people you didn't buy out because you are going to be blighting the hell out of their neighborhood.
2. 30 story towers don't have 1,000 units. Usually you'll see 200-400 units on new construction for a 30-ish story building. However, let's say for a moment you WERE able to get a cluster of 30 brownstones (15x2), you'd have about 50,250 square foot of land (1675 sqft per brownstone) to build on. You'll only be able to use about 75% of that on each floor, and given a 10% allowance for common space, and eliminating the first floor for management, you'll have about 33,918 sq ft on each floor (983,622 sqft total). You divide them up into 30% 600sqft studio, 30% 850sqft 1bdrm, 15% 1200sqft 2bdrm, 10% 1500sqft 2bdrm, 5% 3000sqft 3bdrm, and sell off four half-floor penthouses. That would leave you with 491 studios, 347 1bdrm, 122 sm 2bdrm, 65 big 2bdrm, 16 3bdrm, and 2 penthouses. At market rates, you'd be able to sell as follows: 491 studios for $600k each, 347 1bdrm for $800k each, 122 sm 2bdrm for $1.2m each, 65 big 2bdrm for $2m each, 16 3bdrm for $4m each, and the penthouses for $15m each. That's a cool $972.6m of revenue. Not bad, eh? Well, you paid $750 million for those brownstones (30 at 25 million a pop), and you spent $400m in construction ($400/sq-ft average construction cost in NYC). Oh, and your real estate agent charged you 8% to sell off the units, which ate up another $77.8m in revenue. It took you 5 years to complete the project, and you borrowed $1 billion at 5%, so the bank wants $250m in interest. You're now out $505 million.
3. We're talking about rental units aren't we? There are no price controls on condos.
Perhaps you should try attacking other forms of government regulation that actually inhibit growth such as the lengthy and bureaucratic building permit process and availability of non-union labor. I think you'll find that even regulation aside, the economics of in-filling in Manhattan are still quite prohibitive. Density is expensive, at least from a construction point of view. This is demonstrated time and time again in dense cities.
> The fact that there's virtually zero new high-density condos being constructed in NYC means there's some kind of regulation seriously screwing with the system, because high-density construction should happen naturally when medium-density housing gets insanely expensive.
You're letting your ideology guide your conclusion. There is constant new development happening in NYC, but it's expensive and complex, therefore impossible to outstrip the demand.
You're right, I don't understand New York construction projects very well. You've convinced me, there's a lot more going on here than just rent control. Thanks again!
I don't know, I think some people here have the idea that high tech is intrinsically better than other industries. But from a city's point of view, it's just another industry. The SF Bay Area is high tech. Los Angeles is entertainment. New York City is finance, fashion and publishing, except for the other bits of finance which are in Chicago.
New York City has many problems (though not as many as it used to) and none of them can be solved by bringing in a new industry.
That said, the banks there have very large development teams, but it's all in the service of banking and trading. I've been there, done that; so I could be biased. Overall, the vibe is very un-tech--unless you think algo trading is the tech's ultimate expression.