Seemingly every major real-estate broker in the tri-state area has appeared on CNBC over the past 3 weeks to talk about how their phone has been ringing off the hook with Brooklyn-based millennial couples looking to get the hell out of New York City.

Most are looking into the first-ring suburbs around the city, stretching as far as Connecticut's Fairfield County (and even parts of southern Litchfield), while all of North Jersey is potentially accessible for office workers who will likely never return to the daily commute. Meanwhile, brokers in NYC, who enjoyed a decade-long post-crisis, are assuring their TV audience that the city's real estate market will always bounce back, just like it did after 9/11.

Not everyone is so optimistic, especially when it comes to New York City. Even before the pandemic, the city was struggling with a crumbling subway, surging homelessness. Taxes have been raised, while city services have deteriorated. And as the NYPD pulls hundreds of undercover officers off the street, virtually guaranteeing that the open air drug markets of the 1970s, 1980s and 1990s will make a comeback, along with myriad other quality of life problems, some of the city's most successful real estate investors think young people are probably better off staying in the suburbs, or moving to some other smaller, better-run city.

During a wide-ranging Bloomberg interview, Barry Sternlicht, the billionaire founder of Starwood Capital Group (HOT), shared a vision for NYC that sounded like the beginning of a disaster movie: office buildings in the city will lose 40% of their value - putting unprecedented pressure on the family businesses of the president and his son-in-law, Jared Kushner - one-third of all hotels in the city will go bankrupt, and - most importantly - residential rents will plummet as the wave of gentrification that priced out many minorities from the neighborhoods in which they grew up happens in reverse.

While the looting and the violence witnessed during the protests over George Floyd's murder didn't help, the protests and the virus aren't the City's only problem. In fact, some of the forces driving this trend have nothing to do with the virus, Sternlicht said. Instead, he blamed a "blue-state mentality" that has brought the city to its present "tipping point".

Democrats see upping taxation as the best way to close state budget gaps. When taxes on the wealthiest rise substantially, many of those people leave, creating even bigger holes in the state's revenue stream. Sternlicht isn't the only NYC financier to relocate to Miami in recent years.

As the tax base shrinks, services deteriorate, and taxes rise on those who are increasingly unable, or unwilling, to pay them. People leave, setting off a vicious cycle.

"If they raise taxes, more people leave and the social burden of those that are less fortunate falls on an ever-smaller revenue base," he said. "The services of the city get worse, the city gets dirtier, the police show up less often. It’s a negative cycle."

So long as there’s no COVID-19 vaccine and the virus continues to spread, big city tourism, sports and conventions - a major source of revenue for city businesses and tax revenue for city and state government - will remain largely on hold. While Sternlicht's Starwood, which has some $60 billion in assets, can withstand the hit to its 1 Hotel locations near Central Park and on the Brooklyn waterfront, as well as to its Baccarat Hotel New York in midtown Manhattan, others won't be so lucky. In the end, one-third of hotels will go bankrupt.

“I think a quarter, a third of hotels in New York City could go bankrupt,” Sternlicht said. “It’s going to be ugly. You tell me when big businesses are going to force their clients or customers or employees to go to a group meeting in Vegas or in New Orleans or in Orlando."

Outside NYC, Sternlicht says, his company's properties are faring much better. Hotel bookings in markets like Miami are still happening. But NYC's top retail corridors - like Fifth Avenue and SoHo - will be hard pressed to convince shoppers to return, as more Americans have come to rely on Amazon. This could take a sledgehammer to retail rents in the city, which started showing weakness as far back as 2018.

As fewer young people are willing to move to the city, big tech companies that signed huge leases in Manhattan or Brooklyn office buildings will simply walk away.

WeWork (WE), still the city's biggest corporate landlord, is on track to substantially shrink its footprint, if the company doesn't collapse outright. Tech firms like Facebook and Google are planning to allow far more workers to work remotely. Even on Wall Street, banking executives are talking about needing less overall space. With all of this factors hitting at once, NYC is bound to become the toughest commercial real estate market in the country.

All told, the result may be the city’s biggest real estate slump in at least three decades. According to Cushman & Wakefield data going back to 1990, Manhattan rents haven’t fallen by more than 20% in a single year. "Rents could drop 25% in New York - office rents. I think expenses could go up 25%. You could see office values drop 40% because of that," Sternlicht said. “It’s probably going to be the toughest office market in the country.” Read more: Gorman sees Morgan Stanley future with ‘much less real estate’ And if jobs move elsewhere, the residential market will collapse too. landlords are “desperate” to retain young tenants and increasingly willing to cut apartment rents by as much as 25%, Sternlicht said.

In summary, Sternlicht's "negative cycle" theory is pretty simple: first, the income base erodes. That puts strain on city services and infrastructure, that causes quality of life to deteriorate while cost of living rises, prompting more wealthier residents to leave.

Put another way: New York City's drain is the sunbelt's gain (that is, if the coronavirus outbreak doesn't swallow up the entire region).

Starwood Capital has been investing in so-called red states with Republican governors, such as Florida, Texas and Tennessee, Sternlicht said, because they have growing populations, companies are relocating there and the non-union construction costs are much lower than in blue states run by Democrats. “I don’t think you can make New York miserable for the affluent and expect it to be successful for everyone,” Sternlicht said. "There are other incredible places in the country - or they will be incredible when all the New Yorkers populate them."

Of course, Sternlicht's businesses are feeling substantial strain from the coronavirus pandemic. While he insists Starwood's hotels business will make it through relatively unscathed, its malls business is defaulting on its debts.