By Tom Acitelli on January 28, 2009
Wall Street year-end bonuses dropped 44 percent from 2007 to 2008, according to a report out today from State Comptroller Thomas DiNapoli. The reasons? You know them. For one, a couple of the I-banks that were around to issue bonuses at the end of 2007 were not around at the end of 2008. Whatever the reasons, the sharp decline in bonus totals spells difficulty for several sectors of the city's real estate market, which has been reeling since at least last summer.
First, the take-away from the report:
DiNapoli’s office estimates that the bonus pool paid by the securities industry to its employees in New York City totaled $18.4 billion in 2008 based on personal income tax collections and other factors, including industry revenue and expense trends. This represents a decline of 44 percent compared with the $32.9 billion paid in 2007. The decline is the largest on record in absolute dollars and the largest percentage decline in more than 30 years, but the size of the bonus pool is still the sixth largest on record.
(Here's a PDF of year-end bonus totals going back to 1985.)
The effects on New York real estate will be myriad: the top end of the luxury apartment market, for one, will find far fewer buyers; mortgage lenders will find fewer qualified borrowers; the rental market may actually feel a slight bounce, as would-be buyers, shorn of bonus liquidity, rent for a spell on their suddenly longer way toward homeownership; and, for the commercial market, the decline in Wall Street compensation could lead to empty desks through layoffs or other turnover, which will eventually create more space for lease and sublease.
When Lehman collapsed in September, I wrote in detail about the Wall Street crisis' real estate impact.