On May 1, the Empire State Building turns 90 years old in New York City. Its opening in 1931 was widely celebrated: “the world’s loftiest building,” cheered the New York Times. But as the Great Depression deepened its hold on the American people, the 1,250-foot-tall structure became a national symbol of economic overreach, mocked as the “Empty State Building.” The investors nearly drowned in a sea of red ink. Yet they held on.
By the end of World War II, the Empire State Building towered over the adversity that had shaken its foundations. Ninety years later, confronted by new society-wide-crises, we can still learn from the tenacity of the Empire State Building’s developers, who refused to let the challenges of their time defeat them and the building they championed.
The primary visionary — and moneyman — behind the Empire State Building was John J. Raskob. Raskob was a mostly behind-the-scenes figure in elite circles. He had quietly helped Pierre du Pont create the modern DuPont Corporation. Then he worked with William Durant and Alfred Sloan to turn General Motors into the world’s auto industry leader. Raskob was a financial genius who loved nothing more than putting together deals that filled out the corporate firmament.
Raskob’s business accomplishments made him a figure of renown. The New York Times wrote of Raskob in 1928: “Here was a genius at organization with a breadth of vision and gift for seeing into the future.”
Searching for new worlds to conquer, he teamed up with New York Gov. Al Smith and became Smith’s 1928 presidential campaign manager and chairman of the Democratic National Committee. Raskob was among the first of a now common type in American politics: the immensely wealthy man who uses his money and connections to take a seat at the high table of party politics. Raskob hoped to parlay his premier role in the Smith campaign to an appropriate position in a Smith presidency, perhaps secretary of the Treasury.
But after Smith came up short in the presidential race against Herbert Hoover, Raskob, without missing a beat, turned his eye to New York real estate.
He did so in part because he anticipated the stock market crash. After making millions of dollars in the Great Bull Market of the 1920s, he had begun selling his shares. But he also expected the coming market correction to be short-lived and didn’t think it would affect the broader economy. In the meantime, he figured that investing in New York real estate development would be a prudent choice.
And he was in good company. In 1928, with the U.S. economy booming, wealthy men put up 760 buildings in New York City, dramatically raising its skyline. The American capitalist elite competed to put their stamp on the city while profiting handsomely from what they believed to be a never-ending real estate bonanza in the world’s financial capital. Raskob wanted in, and he wanted to build higher than all the others, including his good friend Walter Chrysler.
In pursuit of his new passion, Raskob devised a development deal involving the site of the soon-to-be-demolished Waldorf Astoria hotel. With a nudge here and a quiet meeting there, Raskob outmaneuvered and replaced the original developer. He brought in several of his favorite people as investors: the banker Louis Kaufman, Metropolitan Life President Frederick Ecker and longtime friend and colleague, du Pont.
Raskob also appointed Smith president of the Empire State Building — after losing the 1928 presidential race, Smith needed a job. It was an all-star team. Raskob wrote to his sister: “It is going to be a beautiful structure and, of course, the largest office building in the world. The Governor and I are having a lot of fun building it.” Raskob assumed that with all of his business connections, combined with Smith’s many allies in state and city government, he would have no problem leasing out the Empire State Building’s 2.8 million square feet of office space.
Amazingly, the Empire State Building was constructed under budget by some 3,400 men in just over a year. It towered over the Chrysler Building and every other skyscraper in New York City, and, indeed, anywhere in the world.
On May 1, 1931, at 11:30 a.m., President Herbert Hoover, champion of the 1920s “New Era” alliance between business and government, who hoped to provide Americans with a note of optimism amid the economy’s darkening clouds, flipped a switch that turned on the building’s lights. A bevy of prominent New Yorkers gathered on the 86th floor where they marveled at “men and motor cars creeping like insects through the streets.” Soon thousands more would take in the panorama from the building’s observation deck on the 102nd floor.
While people flocked to the building’s observation decks, paying tenants were much harder to come by. In 1929, before the stock market crash, office buildings in New York City could count on leasing at least 50 percent of available space even before construction had been completed. The Empire State Building opened with just 20 percent of its space leased, and much of that was taken by the building’s own investors. Despite efforts by Smith, Raskob and the rest of their team to get friends and business associates to lease space, the building remained ghostly quiet. Red ink flowed.
Raskob, the primary investor, broke one of his cardinal rules: Use “Other People’s Money” when undertaking risky investments. Instead he poured his own wealth into the building to keep it afloat. From his palatial office on the building’s 80th floor, Raskob stayed the course. During the war and immediately thereafter, as the U.S. economy grew, tenants began to find their way to the Empire State Building’s empty floors. Finally, in 1950 the building turned a strong profit as commercial real estate rebounded and midtown Manhattan boomed.
Raskob lived to see his building triumphant. But just barely. He died in 1951. His family sold his investment for some $51 million (more than a half-billion in current dollars). Much of the money went to the Raskob Foundation for Catholic Activities, which the extended Raskob family oversees to this day.
The Empire State Building, of course, abides. Today it has about 1,000 commercial tenants, ranging from the FDIC to LinkedIn to the American headquarters of China’s premier newspaper, the People’s Daily. Before the coronavirus pandemic, some 4 million visitors a year paid $75 each (adults) to take in the sights from its observation decks. While it is no longer the tallest building in the world or even in New York City, it still stands sublime. It’s a testament to those who built it and those who staked their fortunes on its rise and their perseverance — especially Raskob’s — in the face of economic cataclysm.