The remarkable recovery of the New York City economy since the end of 2009 has been driven by a number of factors, including strong growth in sectors such as healthcare and tourism.
For property markets, the major driver has been the technology, advertising, media and information industries (TAMI). As of May 2017, employment in TAMI as a group was roughly 79,000 jobs more than at the end of 2009.
However, you can’t look at New York without looking at the financial services sector. Despite the growth in TAMI, financial services is still the largest office-occupying industry in the city. Indeed, financial services accounts for 10.5% of all jobs in New York, far larger than the 5.8% of all jobs the sector represents in the US as a whole.
In addition, these jobs have a multiplier effect on the local economy. According to the Federal Reserve Bank of New York, every additional job in the securities industry leads to two more jobs in other sectors, from legal to accounting to computer services.
Cushman & Wakefield estimates that financial services companies occupy 32% of the office inventory of Manhattan, while the TAMI sector occupies approximately 23%.
The good news for the Manhattan property market is that the financial services sector is growing. New York added 8,300 financial services jobs in the first third of this year, making it the best four-month period of job growth in the sector since the government began reporting the data in 1990. With this spurt of growth, the financial sector has finally recovered all the jobs lost in the last recession.
Since the end of 2009, financial services employment has increased by 47,400 jobs. That growth has come in fits and starts as uncertainty and global financial stress have impacted the sector.
Most of the growth - 38,000 of those jobs - has occurred since the beginning of 2013, as US political and fiscal uncertainty abated and the second Eurozone crisis was resolved. The current spurt may owe at least some of its growth to the rapid improvement in financial markets this year.
Believe it or not, the current seven-plus years of growth in financial services employment has created more jobs in the sector than any previous expansion back to 1990. In fact, with this year’s spurt of growth, employment in the financial services sector is at its highest level since September 2001.
The property market is benefiting from two trends at the same time: growth in demand for financial services and the improvement in financial markets
One trend we are noticing in the New York office leasing market is that some of the growth in financial employment may not be in traditional financial jobs like banking and securities. For example, a major New York-based bank announced in May that it had leased 300,000 sq ft of space for its technology group.
Other financial firms are also in the market looking for space for their technology teams as the demand for financial technology and cybersecurity continues to grow rapidly.
The local property market is thus benefiting from two trends at the same time: growth in demand for financial services and the improvement in financial markets, along with the growing need for technology to deliver and protect financial transactions.
While everyone may tell you to focus on the tech or TAMI sector, it’s important to remember that in New York the biggest user of office space is financial services. And the financial sector is back creating jobs and demand once again.