Our predictions for New York City in 2019
As we enter the New Year, the Cities team in New York discusses the major trends currently shaping New York City and shares predictions for key topics in 2019.
Written by: Alex Stulc, Alice Shay, Josh Margul, Mikayla Hoskins, Richa Yadav, and Shivam Jumani.
Before we launch into our predictions for 2019, it’s worthwhile to look back and see what we called, and missed, in our outlook for this past year. Regarding economic development, we correctly, albeit without much effort, saw that 2018 would be a significant year for transit infrastructure. New York City subway ridership continued to drop despite gains in population and tourism, and the projected cost of saving our transit system continues to expand, although a democratic sweep in the New York State legislature may help fund those improvements. In another easy win, we predicted that Trump’s infrastructure plan (remember that?) would go nowhere. We were right.
We also speculated that 2018 would be “the year of the electric vehicle”. This was certainly true, especially if we consider electric scooters. In May, Governor Cuomo announced a $250 million initiative to expand electric vehicle (EV) adoption across the state. After months of “production hell” Tesla’s mass-market(ish) Model 3 finally turned a profit for the company in Q3, signaling intensifying competition in the EV manufacturing space. However, much work remains on the infrastructure side before a major shift can occur.
Looking forward to 2019, we expect the continued decline of the city’s transit system, exacerbated by the pending L train shutdown, and Amazon’s planned occupation of Long Island City to suck the oxygen out of the room. That means progress towards cutting greenhouse (GHG) emissions and, notwithstanding a catastrophic natural event, improving resilience to what are now extremely unsettling projections for climate change and sea level rise will take a back seat to more immediate concerns. Fortunately, there is a veritable army of government agencies and non-profits, many of which we have been honored to work with, dedicated to addressing these concerns.
We have kept the same themes as last year—sustainability, mobility, and economic development—for our 2019 predictions.
Real estate and economic development
In early 2018, “Opportunity Zone” (OZ) entered the lexicon of finance and real estate professionals across the country. Created as part of the December 2017 Tax Cuts and Job Act, the OZ program allows investors to defer taxes on capital gains reinvested into a qualified fund, and potentially circumvent taxes on gains from that reinvestment. Although some key details on the program are still lacking, we agree with many other observers that a surge of new development capital will become available in 2019. In New York City, this means developers will move quickly on projects in qualified OZs to capture equity before the window for deferral is closed. Although we don’t think the program will achieve much in terms of neighborhood revitalization—many OZs are already gentrified—we expect an acceleration of development in neighborhoods such as Downtown Brooklyn, Washington Heights, Mott Haven, and of course, Long Island City.
We promise not to talk about Amazon too much, but must say that we were surprised by their initial lack of preparation for the HQ2 announcement backlash. This is New York. Although City Council approval isn’t required for the deal, we expect local leaders to extract much more from the company before 2019 is over.
On the commercial real estate front, we watched WeWork usurp JP Morgan as the single largest tenant of Manhattan office space in September, one indicator within a larger trend towards coworking and flexible office spaces in major urban centers. As this product type matures, we expect to see continued growth in 2019 as more established companies join the movement. We see a growing bifurcation in the commercial market, with players like WeWork and Knotel capturing small to mid-size businesses and larger companies—Google, JP Morgan, and now, Amazon—staking out territory across the city to develop or refurbish their own offices. Although we don’t expect a recession in 2019, at least not the first half, the eventual downturn will test the resilience of both sides.
We expect the residential market to continue slowing down in 2019, with rising interest rates, vanishing property tax deductions, and increased construction costs—thank you trade war—stifling investment, and higher inventory pulling down rental prices in certain neighborhoods. We expect this “correction” to last until the bottom of the cycle, in 2020-2021, followed by a massive boom in new, affordable, highly efficient and resilient housing. We can dream, can’t we?
Mobility and transportation
We predict that next year, more than a decade after it was proposed by the Bloomberg administration, congestion pricing will finally become a reality. With the aforementioned Democratic control of the State Senate and another term for Governor Cuomo, not to mention the MTA funding gap, we believe the political stars have aligned for this initiative. It seems as though the potential revenue stream has already been earmarked: both the Governor’s 100-day plan for 2019 and the MTA Sustainability Advisory Workgroup recently cited congestion pricing as a crucial piece of funding for transit improvements. All signs point to success, and it’s about time. After all, why should London have all the fun?
As we mentioned earlier, the closure of the L train, another summer of ungodly heat and rampant delays, and—in case you forgot—Amazon, will leave the public screaming louder than ever for better transit service. Andy Byford’s new MTA plan, Fast Forward, laid out $9 billion in new investment to improve service through enhanced capacity, such as improved signal systems and new train cars, but it currently lacks the State funding needed to see it through. Mr. Byford plans to present an economic impact analysis of the plan to State legislators in the spring. We’ll be watching.
In the midst of the city’s faltering transit system and self-actualizing its destiny as the next Silicon Valley, it is becoming abundantly clear that better options for mobility are necessary to remain competitive in the long term. As such, we expect to see continued experimentation and investment in alternative modes of transportation in 2019. Specifically, we see great potential in curb-pricing services such as ClearRoad, electric micro-transit services such as The Free Ride, and last-mile electric scooters such as Bird and Jump Bike. New campus-scale developments across the city—Cornell Tech, the Brooklyn Navy Yard, and the South Brooklyn industrial campus—are fantastic opportunities to beta test these services before a larger release. We think 2019 is the year to scale up and out!
Sustainability and climate change
While the Trump administration has distracted itself with rolling back federal programs for environmental protection, and avoiding indictment, the nation’s cities and states have continued to step up on climate change. In September, California approved one of the most ambitious goals for clean energy we’ve seen yet: carbon neutrality and 100 percent carbon-free electricity by 2045. In July, Seattle launched a new pilot program to install EV charging infrastructure in public rights-of-way, with a goal of making 30 percent of personal vehicles EV’s by 2030. Locally, NYCHA introduced the ACCESSolar program in September, which promises to install 25 megawatts of new solar on the Authority’s properties by 2025. The MTA has also begun a three-year electric bus pilot to guide their 2040 goal for an all-electric public bus fleet.
In late November, City Council Member Costa Constantinides introduced a progressive new bill to limit GHG emissions from large buildings by 40 percent over the next decade, with compliance required as soon as 2023. If approved, the legislation would establish a new office within the Department of Buildings (DOB) to enforce the requirements, and expand Local Law 87’s current retro-commissioning requirements to buildings 25,000 square feet or more in area. The bill sets the stage for more stringent building energy requirements, with a nudge towards electrification, and provides the DOB with tools to ensure compliance. Although we don’t expect much love from building owners, regulations of this magnitude are realistically the only way to achieve meaningful reductions in GHG emissions.
As we approach 2019, it seems that the City is ready to play hardball in terms sustainability and climate action policy. With the low-hanging fruit—energy efficiency programs—already well developed, the process of implementing and enforcing new sustainability regulations will reveal new challenges and unexpected outcomes. With significant momentum behind building and vehicle electrification, we’ll be watching utility companies closely to see how they respond to new loads and shifting patterns in demand. Let 2019 be the year of aggressive grid modernization!