Facing increased competition for blue-chip recruits, most Wall Street banks have increased compensation for first-year analysts, with firms paying upwards of $90k in base salary for some roles. While it’s hard for a 22-year-old to earn a better salary after graduating, the already astronomical cost of living in New York City is climbing at a faster clip than wage growth for incoming bankers.
At this point, one can assume most incoming investment banking analysts know at least some of the realities concerning the cost of living in New York. Yet 2019 has added a twist that hasn’t been seen in years. Fear over a potential recession has quickly dampened the real estate market in Manhattan, despite the fact that city residents are generally flush with cash. The end result is something that can only happen in New York or a few other comparatively expensive cities.
Nervous would-be buyers have reversed course and are leasing instead, causing rental prices in New York to hit all-time highs. While 20-year-old college graduates likely wouldn’t be submitting applications against multi-millionaires, the flooding of the rental market is trickling down to every level. As of January, the average rent in New York increased a ridiculous 7.35% in just the last year. That compares to an average annual increase of 3.9% per year over the last decade. In short, rent prices in New York are increasing at twice their normal rate.
Meanwhile, median salaries for first-year analysts rose from $85k to $87k over the last year, according to Wall Street Oasis. New York has one of the highest marginalized income tax rates of any state, plus there’s an additional New York City tax if you work in the five boroughs. Considering all that, the best-case scenario for a single person making $87k is to take home just north of $58k, or $1,040 per week.
Of course, the rent wars are worse in Manhattan, and particularly in neighborhoods close to big investment banks where analysts usually try to live to cut down on commute times for the sake of more sleep. The average rent for a one-bedroom apartment in Battery Park City, home to Goldman Sachs, is now $3,700, according to StreetEasy. It’s even worse in the Financial District, where the average rent is now nearly $4,100. Midtown prices are similar to those near Battery Park.
Obviously first-year analysts won’t be applying for those apartments, nor would they in a more normal year. But increased wages have been completely wiped out by abnormal rent hikes, even for New York City standards. Get roommates, live in a walk-up, plan accordingly. Just try not to do what one Goldman Sachs intern did because he wanted to live in a happening neighborhood. He and his roommate not only shared a bedroom, but also a bed, in an effort to keep their individual rental costs around $1,110 a piece while living in hip area.