Seventy percent of the generation said they’re living paycheck to paycheck, according to a new survey by PYMNTS and LendingClub, which analyzed economic data and census-balanced surveys of over 28,000 Americans. It found that about 54% of Americans live paycheck to paycheck, but millennials had the biggest broke energy.
By contrast, 40% of baby boomers and seniors said they live paycheck to paycheck, the least of any generation. Living paycheck to paycheck reflects economic needs and wants just as much, if not more than, incomes or wealth levels, according to the report. Age and family status also factor in greatly. This explains why millennials, who turn ages 25 to 40 this year, are struggling.
“Millennials – especially older ones – are collectively at important stages of their lives,” the report reads. “They may be starting families or taking on their first major purchases, such as homes and new vehicles, but they may also be less advanced in their careers than their older counterparts.”
The pandemic threw yet another wrench into their plans by giving them their second recession and second housing crisis before the age of 40. The report acknowledges that the pandemic played a major role in that stretched thin feeling.
“Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty,” it states. “The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated.”
It’s left even six-figure earning millennials struggling to get by. The survey found that 60% of millennials raking in over $100,000 a year said they’re living paycheck to paycheck.
Of course, the economy isn’t fully to blame. Some millennials, particularly the six-figure earners, are known to fall victim to lifestyle creep, when one increases one’s standard of living to match a rise in discretionary income. This makes it more difficult to balance spending and savings habits.
But the report found that those who felt they were living paycheck to paycheck were mostly financially responsible. If they received additional sources of income during the year, many tucked it away rather than spent it.
It seems, then, that it’s a combination of external economic circumstances, a precarious life stage, and some spending habits that are leaving millennials feeling strapped for cash.
Sixty percent of millennials raking in over $100,000 a year say they’re living paycheck to paycheck, according to a new survey by PYMNTS and lending company LendingClub which analyzed economic data and census-balanced surveys of over 28,000 Americans.
It found that the more than half (54%) Americans are living paycheck to paycheck. And nearly 40% of high-earners – those making more than $100,000 annually – say they live that way.
That means high-earning millennials aren’t the only ones feeling stretched thin, but they feel that way more than their six-figure making peers. Living on constrained budgets may therefore have less to do with income and more to do with expenses, the report says.
That’s partly due to lifestyle choices. Many of these millennials are likely HENRYs – short for high earner, not rich yet. The acronym that was invented back in 2003, but has come to characterize a certain group of 30-something six-figure earners who struggle to balance their spending and savings habits.
HENRYs typically fall victim to lifestyle creep, when one increases their standard of living to match a rise in discretionary income. They prefer a comfortable and often expensive lifestyle that leaves them living paycheck to paycheck.
The economy is also a huge factor behind six-figure-earning millennials feel so broke.
As the report reads, “Living paycheck to paycheck sometimes carries connotations of barely scraping by and of poverty. The reality of a paycheck-to-paycheck lifestyle in the United States today is much more complex, and the current economic environment has made it even more complicated.”
It cited the example of a college-educated 35-year-old earning more than $100,000 while juggling a mortgage, student-loan debt, and a child, which could leave them with little savings for big purchases or unexpected emergencies.
The cost of education has also more than doubled since the 1970s, leaving many millennials racked with student debt. Priya Malani, the founder of Stash Wealth, a financial firm that works with HENRYs, previously told Insider that 40% of her clients had student loans – they owe $80,000 on average.
As a byproduct of this increased cost in living, the middle class has been shrinking. Pew Research Center defines the US middle class as people earning two-thirds to twice the median household income, earning about $48,500 to $145,500 in 2018, per most recent data available.
That means a six-figure salary is no longer what it used to be. In today’s economy, $100,000 is considered middle class in the US.
It’s good news for the economy, which needs Americans to spend a good portion of the $2.6 trillion they’ve saved during the pandemic to help fuel what could be the biggest boomtime in a generation.
But something is different – the spending on private or homebound matters, which spiked during lockdown, is staying high. Americans’ yearlong stint inside boosted the homebody economy, a phrase coined in 2018 by Vox’s Kaitlyn Tiffany coined to describe the growing market among millennials, who couldn’t afford to do much but stay at home. Now, many Americans seem to be enjoying this way of life, and it doesn’t look like it’s going away anytime soon.
Home spending grew at a strong pace in April, according to a Bank of America Research note from May 14. It found that for the week ending May 8th, the average daily spending in home categories grew by 37.8% over a two-year basis. A recent survey by McKinsey & Co. found that consumers intend to continue the investments they made in their home life post-pandemic.
What McKinsey predicts is a “rebalancing” of the homebody economy. What emerged in 2020 is a new category of spending in the form of private consumption, that might be here to stay even as we return to normal. Home improvement, at-home cooking, comforts like bedding and pajamas, and online entertainment may all now get as much attention as experiences like travel and dining out traditionally have.
The home improvement boom
Many Americans turned to home renovation projects during quarantine, the beginning of a long-lasting boom.
Home improvement and repair spending grew by nearly 3% to $420 billion in 2020, per a recent study by Harvard University’s Joint Center for Housing Studies (JCHS). Abbe Will, one of the report’s researchers, previously told Insider they expect the home remodeling market to expand even further in 2021 – by 4% – as homeowners complete discretionary projects or those they put off during quarantine.
Spending at home improvement retailers is currently outpacing spending at product retailers, per the BofA data. And UBS’ Evidence Lab DIY survey found that a record percentage of homeowners are planning projects. In March, 71% showed intention to do a project within the next three months.
Baby boomers with equity led the home improvement boom, driven by newfound time on their hands, the desire to stay in their homes, and a historic housing shortage. With moving to a different place in such a cutthroat market an unattractive option and the value of homes going up amid record-high housing, they became more willing to spend on remodeling than past generations.
But millennials were cashing in on home projects, too. DIY renovation became a new form of discretionary spending during the pandemic for wealthy millennials, who no longer had travel and brunch to spend on. But it also became a way for the less wealthy subset of the generation to get their hands on a house amid a shrinking housing inventory.
Some, unable to outbid all-cash offers, resorted to buying fixer uppers. Many checked off their smaller, more budget-friendly renovations last year and are now facing more expensive renovations like bathroom and kitchen remodels that will continue to fuel the boom through 2021 and beyond.
Newfound at-home hobbies and luxuries
While home improvement spending has been one of the biggest sectors driving the sustaining homebody economy, the BofA note also found that spending in furnishings and bedding is playing a role. They’re both an offshoot of home renovations, but bedding also symbolizes an upgrade in comfort – with coziness a common theme in pandemic spending.
A spokesperson for Liketoknow.it told Insider’s Bartie Scott in April that consumers “are very much still in the cozy mindset,” continuing shopping for the things that began trending since the start of lockdown: loungewear, matching sets, nap dresses, and home bedding.
Self-care items like pajamas took the place of what Lorna Hall of London-based trend forecasting firm WGSN calls “scheduled spend” – the purchases people regularly made in their pre-pandemic routine, like coffee, commuter fare, and lunches out. These regularly scheduled budgets changed as routines did, but they might have found a permanent place as we change routines yet again. As Hall told Scott, “bedtime is a thing that comes around every day.”
As part of this routine shift, people also took on new at-home hobbies and domestic activities. The pandemic changed Americans’ cooking prowess, as many turned to the kitchen with nothing better to do. They made more meals at home, experimented with different palates, and focused more on healthy ingredients – all of which could have long-lasting effects on how people cook and shop for years, CNBC’s Melissa Repko reported.
It sparked a resurgence in meal kit delivery services, which McKinsey doesn’t see abating. Between 60% to 70% of respondents said they expect to continue digital food related activities after the pandemic, such as meal-kit delivery services and new store and restaurant apps. Respondents also expect to accelerate their digital spending in pet products and consumer electronics going forward, two categories that are also seeing two-year growth, per BofA data.
Spending on consumer electronics will only enhance the at-home entertainment experience. McKinsey also forecasts that the online entertainment and wellness habits adopted during the pandemic – think the TV watching and streaming surge and the turn to digital fitness apps and social channels – will remain for medium to long term.
A new era for the economy
Now, this isn’t all to say that Americans want to sit in their home forever. After a year locked up, they’re ready to break free and resume normalcy.
Vaccinated consumers are beginning to return to out-of-home activities and spending at near pre-pandemic levels, according to McKinsey. And consumers overall plan to spend extra on travel and mobility, out-of-home entertainment, and restaurants after the pandemic. But they’ve also “made substantial investments in their home life which they want to continue, even after the pandemic subsides,” the report reads.
The private consumption that gained foothold during quarantine finding its way into a post-pandemic landscape says a lot about the American mindset right now. For one, it’s likely that people realized both some of the conveniences and joys of a life at home, such as the ease of a meal kit or the luxury of sleeping in silk pajamas.
It also signals that for all the progress we’ve made, we’re not quite out of the pandemic just yet. The return to normalcy will be gradual, as many people need to more time to unfreeze from the trauma of the pandemic before transitioning to more out-of-home activities.
The predicted economic boomtime could usher in a new era in the US economy, one that will be reshaped by the pandemic. If consumer spending indicates anything, that will include a more pronounced desire for experiences, but also a more pronounced desire for being a homebody.
Wealth no longer means what it used to for high-net-worth millennials.
The pandemic has caused the wealthy to alter their lifestyles and reassess their priorities, changing how they perceive wealth in the process, a new report by Boston Private found. The report, titled the Why of Wealth, surveyed high net-worth individuals with at least $1 million of assets.
Millennials, who turn ages 25 to 40 this year, changed their perceptions of wealth the most. More than three-quarters (89%) said the pandemic altered the way they define wealth. The generation was also most likely to say the pandemic shifted their wealth priorities and their emotions about wealth, with 85% of respondents feeling this way about each change.
Both Gen X and Gen Z felt fairly similarly, with at least three-quarters of each cohort identifying in the same way for nearly all these sentiments. However, it’s a sharp contrast from baby boomers and the silent generation. Less than a quarter (24%) of both generations combined said the pandemic changed their perception of wealth. The report attributes this to their age, as they’ve already experienced significant cultural milestones and being more settled into a certain mindset.
More millennials (as well as Gen X) associate wealth with success and happiness, whereas boomers and the silent generation are more likely to view wealth as peace of mind and independence. “For these younger generations, wealth is a key contributor to creating a comfortable, happy life, and is directly related to achieving important goals, having a good family life and being a positive contributor to community and society,” the report reads.
Older generations feel less able to use their wealth on enjoying life as much as they’d like to right now, according to the report, whereas younger generations are possibly using their wealth to enjoy life more than they feel they should.
What’s more is that this shift in perception of wealth has also affected millennials’ wealth goals – 78% said the pandemic changed how they planned to use their wealth in the future, compared to 26% of baby boomers and the silent generation.
Bank accounts are freshly padded with $1,400 stimulus checks, any adult should be able to get a vaccine around May, and everyone is readying for a “hot vax summer.” Shut-in Americans are gearing up to spend and socialize after a year in which the experience economy was replaced by one defined by solitary leisure.
In a year marked by social distancing, activities enjoyed alone such as golfing and boating replaced the group activities typical of social leisure, like amusement parks and tourist attractions. At the end of last August, Google Mobility data showed that restaurants, theme parks, museums, and the like were down 77% from pre-pandemic levels, and visits to parks, beaches, and marinas were up 51%.
Spending on experiences in 2020 declined by 29% compared to 2019, per a February Bank of America Research note. Spending on leisure fell by 17% and spending on “stuff” was down by 6%. Spending on solitary leisure categories such as golf and bikes remained strong in mid-March, per a subsequent BofA note.
But the anticipated economic boom of 2021 that should follow a mass vaccine rollout signals that the US will soon say goodbye to solitary leisure. A full economic recovery depends on something else, though: how the wealthy will spend their money.
The wealthy need to spend
The drop in spending left a huge hole in the economy that spending on solitary leisure alone couldn’t fill.
That’s because the experience-based economy, which thrives on activities like sporting events and travel, only continues to grow as long as people have discretionary money, Daniel Yoder, the department chair of the Recreation, Park, and Tourism Administration at Western Illinois University, previously told Insider. But discretionary spending all but disappeared.
Now, Americans are sitting on $1.6 trillion in savings. BofA Research estimates that to hit $2 trillion by the time the economy reopens. The economic fate of the US, it said, depends on whether Americans view their excess savings as wealth or deferred income.
Much of that is in the hands of higher-income households, who have more of a propensity to spend. Consumer spending accounts for 70% of the American economy, and half of that is from the top 10% of American households, per estimates from Goldman Sachs and Deutsche Bank, respectively. That means about one-third of US GDP comes from spending by the top 10%.
That all means it’s up to the wealthy to fill the gap from the solitary leisure era. “Higher income households are key to driving the recovery in consumption,” reads a recent UBS note led by strategist Keith Parker, which noted that more than half (52%) of Americans expect to increase their spending once life returns to “normal.” Those earning more than $80,000 annually anticipate increasing their spending the most – a more than 8% increase, compared to 5.2% for middle-income earners and 3.4% for those earning less than $30,000.
During the pandemic, spending among high earners was consistently 10% below pre-pandemic levels, compared to 5% below for middle-income earners. But spending less doesn’t mean they stopped spending entirely.
Instead of splurging on pricey gym memberships and educational trips as forms of discreet wealth, they began shelling out on nostalgia-tinged purchases from childhood collectibles to vintage fashion to rare books and art, from street art to cryptoart. Critics charged that the pandemic economy created various strange asset bubbles, but the common theme of people with money buying stuff online while bored at home was consistent throughout the year.
But that all might soon look a lot different.
A return to social leisure
As the economy continues to reopen amid the vaccine rollout, it increasingly looks like America will see the return of social leisure.
There are also signs that travel is on the verge of a booming comeback as Americans itch with wanderlust. Airports saw their busiest time the weekend of March 12 since the pandemic began, and airline, hotel, and restaurant spending are all up this month compared to a year ago, although still not close to pre-pandemic times.
And, after a year of loneliness, Americans are ready for intimacy. Dating apps saw record-breaking use during the pandemic, and it looks like that won’t be abating any time soon. Several people told Insider’s Julia Naftulin that they’re looking forward to relentless dating and relieving pent-up horniness in a vaccinated world.
More in-person dates are certainly set to fuel the rebirth of the experience economy, inciting a shift from Facetime and socially distanced walks to nights at movie theaters and cocktail bars.
The caveat is that President Biden has been eyeing a tax increase on Americans making over $400,000. They could see their top income-tax rate increase to 39%, which could curb their desire to spend. So too, could the unpredictability of inflation as goods begin to get more expensive along with reopening.
The light at the end of the tunnel for a new “new” normal is within sight, but the wallets of the wealthy will determine just how bright it gets.
Coronavirus lockdowns and two stimulus packages left American consumers sitting on approximately $1.6 trillion of pent-up spending, according to Commerce Dept. figures released on Friday.
As the pandemic shut down the experience economy, Americans shifted away from social leisure – recreational time spent in groups – and toward activities enjoyed alone. Now, 11 months later, spending on this kind of solitary leisure hasn’t been enough to bring the economy back to its 2019 levels, let alone beyond. The many Americans who weren’t hit by job loss or pay cuts have built a fatter savings cushion than they would have otherwise.
Three striking data points put the American consumer’s $1.6 trillion in dry powder into perspective.
(1) Americans account for half of global savings during the pandemic
That means Americans’ $1.6 trillion in savings accounts for slightly more than half of the global number, followed by China, Japan, and major European nations like Spain and the UK.
Bloomberg expects these savings to continue to grow as restrictions continue and governments implement more stimulus, notably President Joe Biden’s $1.9 trillion relief package. But as the vaccine rollout picks up speed, more spending may happen sooner rather than later.
(2) American savings are equivalent to South Korea’s GDP
The amount of spending money Americans are currently sitting on is the equivalent of another major industrialized country’s economy. As of 2019, South Korea’s GDP, or annual output, was $1.6 trillion.
Experts are currently projecting 4.6% growth for US GDP this year, per Bloomberg. If Americans spend all the money they saved in the past year, that could jump to 9%; whereas if they don’t, the GDP forecast could drop to 2.2%.
(3) Americans saved more than the decline in spending
Experts continue to debate how big a hole the coronavirus left in the economy. Biden, Wall Street, and the Federal Reserve see a larger hole, while the Congressional Budget Office (CBO) and moderates see a smaller one, Insider’s Ben Winck reported.
Americans’ $1.6 trillion in savings is therefore roughly $1 trillion bigger than the output gap. That means consumers won’t need to collectively spend the entirety of their pandemic savings to close the output gap.
While the full $1.6 trillion is unlikely to be spent, the changes seem good that the output gap will be more than filled when the economy eventually reopens. In fact, it could be more spending than the US economy has seen in some time, given the historically weak recovery from the Great Recession of 2008.
Showing off wealth is no longer the way to signify having wealth.
Flashing a Louis Vuitton handbag or a multimillion-dollar Bugatti have long been standard status symbols for the elite, but the ultrawealthy have increasingly turned to intangible investments such as security and health to discreetly flaunt their wealth instead. An unlikely reflection of this transformation is the recent history of inflation in the US economy.
The latest iteration, featured below, shows 54.6% overall inflation over the last 21 years, which works out to an annualized compound growth rate of 2.2%, very close to the Federal Reserve’s stated inflation target.
But as you can see, some services and goods have become way more expensive than others.
Hospital services, college tuition, medical services, and housing have seen disproportionate upticks past the average 54.6% inflation. Their costs have outpaced the hike in average hourly wages, which have shot up by 82.5%, or 28% more than the average increase in consumer prices.
Meanwhile, consumer goods such as new cars, clothing, computer software, toys, and TVs have become more affordable.
In a nutshell, it seems that the cost of intangible services (with the notable exception of housing) has increased while the cost of material goods has decreased, mirroring the shift from conspicuous to inconspicuous consumption.
Elizabeth Currid-Halkett coined the term in her 2017 book, “The Sum of Small Things: A Theory of the Aspirational Class,” as the opposite of “conspicuous consumption,” a term conceived by 19th-century economist Thorstein Veblen referring to the concept of using material items to signify social status.
In the US in particular, the top 1% have been spending less on material goods since 2007, Currid-Halkett wrote, citing data from the US Consumer Expenditure Survey. In an era where mass consumption means both the upper class and the middle class can own the same luxury brand, she explains, forgoing material goods for immaterial means is a way for the rich to differentiate themselves.
“This new elite cements its status through prizing knowledge and building cultural capital, not to mention the spending habits that go with it,” Currid-Halkett wrote, adding, “Eschewing an overt materialism, the rich are investing significantly more in education, retirement, and health – all of which are immaterial, yet cost many times more than any handbag a middle-income consumer might buy.”
That inconspicuous consumption often goes unnoticed by the middle class – but getting noticed by a fellow elite is the appeal of the discreet. Investing in things like education, health, and childcare – which have all become more expensive since 2000, per the AEI chart – “reproduces privilege” and “offers social mobility” in a way that flaunting luxury couldn’t, according to Currid-Halkett.
Discreet wealth is just one of many inflation factors
Now, this isn’t to say that discreet wealth is the sole cause of inflation in the US.
Mark Perry, the AEI economist behind the chart, notes in his blog post that economists have attributed several reasons to these trends: Price increases correlate with a greater degree of government involvement in a good or service (like health care) and prices decrease as the degree of international competition for goods increases (like toys).
Mass production has enabled manufactured goods to become more affordable. And college has become more expensive for many reasons, including increasing globalization, increases in financial aid, and ballooning student services.
But the fact that the inflation chart correlates with the rise in discreet wealth indicates the power of demand in driving up prices – and the spending power of the elite as wealth inequality worsens in developed economies.
More millennials bought homes last year than any other generation, according to Apartment List’s Homeownership report, as the pandemic accelerated a five-year trend in which millennial homeownership rates rose the fastest as the generation aged into the career advancement and prime homebuying stage of their 30s.
The influx of millennial homebuyers was goosed by families fleeing big cities for the suburbs and historically low interest rates, making buying easier for those with enough money saved for a down payment. Finally, homeownership had become more attainable for a generation famously behind in homebuying compared to previous generations.
But the surge isn’t enough for millennials to close the homeownership gap.
Less than half (42%) of millennials are homeowners, per the report, compared to 48% of Gen Xers and 51% of baby boomers when they were the same age. While first-time home purchases increased from 31% to 33% in the past three years, the report said, the uptick doesn’t come close to the 50%-plus first-time buys during the pre-Great Recession “homeownership boom.”
The pandemic will likely continue to exacerbate this generational chasm, the report states, partly because it’s caused some millennials to delay homeownership or give up on homeownership entirely.
(The report looked at data from the US Census Bureau and the annual Apartment List Renter Survey, which polled 1,851 millennials.)
The millennial wealth gap makes it harder to close the generational wealth gap
Twenty-one percent of millennial survey respondents said the pandemic caused them to postpone buying a home. Of this cohort, 67% cited income loss and 21% said they had to dip into their down payment savings. And 18% of respondents plan to rent forever, with 74% of them citing affordability as the key reason.
The stark divide among millennials who find homeownership attainable and the peers who find it unattainable reflects the millennial wealth gap, in which one cohort of millennials is faring well and the other is struggling. As the pandemic intensifies this intragenerational gap, it’s become even harder for millennials to close the wealth divide that exists outside their generation.
President-elect Joe Biden’s $1.9 trillion stimulus package includes a $1,400 top-up for stimulus checks, bringing the total distributed amount from December to $2,000.
These kinds of direct payments are intended to encourage consumers to spend, stimulating the economy.
BofA Research found those who received $600 checks in the last stimulus spent 30% more than those who didn’t, and as a result upgraded its forecast for GDP growth to 4% in the first quarter, from 1% previously.
The stimulus is the first step in Biden’s attempt to fix America’s K-shaped recovery, in which the wealthy are doing fine and the rest are struggling.
President-elect Joe Biden introduced his plan for a $1.9 trillion stimulus package on Thursday. Called “The American Rescue Plan,” the package would provide another infusion of federal aid to stimulate the economy as the pandemic continues to sweep the nation.
That includes a $1,400 top-up for stimulus checks, bringing the total distributed amount from December to $2,000. It’s set to make a big difference in consumer spending.
The $900 billion stimulus which passed at the end of 2020, lambasted in some corners for not being hefty enough, has already helped stimulate the economy. Those who received $600 stimulus checks as part of December’s package saw a 20% year-over-year increase in spending since January 1, according to a recent Bank of America Research report which cited proprietary bank data on consumer spending. They also spent 30% more on their cards compared to those who didn’t receive a check.
Citing the increased spending, BofA forecast GDP growth of 4% (up from 1%) in the first three months of 2020, before slowing to 5% the following three months (down from a previous projection of 7%). The bank expects overall GDP growth of 5% in 2021, up from the prior 4.6% forecast. (BofA could further revise its forecast once the $1.9 trillion package passes.)
Now that Americans will have even more extra money in their pockets, it’s likely that spending will continue to rise among those who receive stimulus checks, continuing to prop up the economy.
$1,400 checks are intended to help America’s K-shaped recovery
It’s partly because the tools to used to save America’s economy so far have mostly helped wealthy Americans. In March, Federal Reserve Chairman Jerome Powell implemented a policy known as quantitative easing, in which the central bank did the rough equivalent of “printing money” by adding credit to its bank accounts, buying its own debt and thus increasing the supply of money in the economy. He also kept interest rates low to encourage spending.
These two drivers helped stocks recover, incentivizing the wealthy to pump money into the stock market as they sought a sizeable return. Relatedly, America’s household wealth hit a record high of $123.52 trillion in the third quarter.
Powell has repeatedly advocated for more stimulus spending, and Joe Biden’s $1.9 trillion stimulus package looks like a clear response. If it passes, it may make Bank of America’s 5% annual GDP growth forecast look tame.
Tesla also has a Cybertruck factory under construction in the area. Its founder and SpaceX CEO Elon Musk is the latest high-profile tech figure to announce a move to Texas, but it’s unclear where in the state he’s moving.
“There are lots of people that have already moved that haven’t been written about that are pretty high profile,” venture capitalist Keith Rabois, who headed to Miami instead of Texas, told Morris and Jin. He declined to name who else left. “Post-COVID, I think the concentration of talent has atrophied, perhaps permanently.”
He said that pre-pandemic, San Francisco’s spot at the top of the tech hierarchy outweighed his dislike for the city, but remote work has scrambled that hierarchy.
Wall Street is flocking to Florida
While California’s tech elite are packing up their bags for the Lone Star state, New York’s financiers are trading in skyscrapers for sunshine in Florida.
Blackstone, the world’s largest private-equity firm, headquartered on Park Avenue in Manhattan, is opening an office in Miami with plans to bring as many as 215 technology-focused jobs there. More recently, Goldman Sachs has been considering plans to shift asset management operations out of New York, Bloomberg first reported.
Business Insider recently spoke with 13 finance and real estate professionals about Florida’s ascendant appeal amid the pandemic, many of whom described an uptick in bigger and longer office-space leases by out-of-state firms and high-end real estate inventory running low as Big Apple financiers flood the area.
Stephen Rutchik, Colliers’ executive managing director of office services for the South Florida region, had told Business Insider during these talks that low taxes, warmer weather, and a low-key vibe had lured financial services firms in recent years.
But interest really popped off in July, he said, when the industry had become more comfortable with remote work. Rutchik said his team is seeing unprecedented interest, with the call volume from prospective tenants increasing “overnight” to “torrential” levels.
“We’re touring hedge funds on our agency side one to three times a day,” he added.
CA and NY are still top, but TX and FL are officially in the game
While Texas and Florida are enjoying the limelight as the new hotspots, experts say they won’t come to dominate New York’s Wall Street and California’s Silicon Valley.
Jonathan Woloshin, head of real estate and financials research at UBS, acknowledged to Business Insider that Texas and Florida have been and will continue to be the beneficiaries of further population, job, and business growth, and job inflow will contain a greater percentage of “front line” work as opposed to back office-related functions. But they aren’t necessarily the “new” California and New York, he added.
Ron Conway, the founder of SV Angels who’s been called “the godfather of Silicon Valley,” recently told Business Insider this isn’t the end for Northern California’s dominance.
“The Bay Area’s challenges can be frustrating, to be sure, but there’s still no place on earth like the Silicon Valley and the San Francisco Bay Area when it comes to talent, access to capital, and the tech ecosystem for startups that have created so many successful companies and founders,” he said.
Regarding Florida, several experts Business Insider previously spoke with highlighted a few challenges that could ensure the real Wall Street hangs on to its core position: a tighter labor market, expensive relocation costs, and a shortage of available luxury homes, to name a few.
Across the pond, similar fears that London would lose its luster after the Brexit vote have (so far) proved unfounded. Despite UK fund managers predicting 16% of Britain’s asset management jobs would relocate, a Financial Times survey found the majority of international banks and asset managers have actually increased their number of London employees since 2015.
California and New York may remain unparalleled in the long run, but Texas and Florida’s elevated status as the current main attractions could give the former two a run for their money.
Woloshin said that as more individual wealth becomes concentrated in Florida and Texas, it’s likely that more venture-like and private equity fund-raising and investing could occur in both states.
“New York and California are likely to remain strong business destinations given their attractiveness to the talent pool,” he said. “However, going forward, they will not be the only game in town in terms of high-quality job and wealth creation.”