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Almost 19 percent of office in New York City remain completely empty despite coronavirus restrictions
being lifted more than two weeks ago and easing starting months earlier.
Although many companies have either called or are preparing
to request workers to return to their offices, the amount
of space available to be leased to firms is at an all time high.
The figure illustrates just how remote work has quickly become
the norm for many would-be office workers - while also having the effect of sending the city's commercial real estate industry into turmoil.
Paradoxically, the surge in the amount of office space comes with a parallel surge in Manhattan residential real estate prices.
Nearly 19% of all office space in Manhattan have no tenants,
reaching a record high as companies break leases and adopt remote
work
The median resale prices for Manhattan apartments
hit $999,000 in the second quarter - an all-time high since before the COVID-19 pandemic hit -
according to the report from Douglas Elliman and Miller Samuel.
Average sale prices in the borough rose 12% in the quarter, surpassing $1.9 million.
When it comes to office space, before the
pandemic, some 1.6 million people would commute into the city every day.
Their presence helping to keep other businesses afloat with everything from shop
and restaurants to theaters feeding off the back.
The amount of available space has only increased since
the end of 2020 when 15 percent was available to be leased.
That number has since jumped to 18.7 percent according to Newmark,
a real estate services company.
In Downtown Manhattan, the number is even higher with 21 percent of offices without
tenants.
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Neighborhoods, such as Downtown Manhattan, are faring worse, with 21% of offices
having no tenants
The exodus is similar to what was experienced
in the 1970s, when half of the city's 125 Fortune 500 companies moved out as the
Big Apple fell into a financial crisis. Pictured, a sign advertising an apartment for rent in a building in Manhattan in 1978
A view of Downtown Manhattan looking towards the Financial District in the 1970s
With more employers allowing their workers to remote work for
at least a portion of the working week, companies are now recalculating the
amount of space they need and looking to reduce their square footage in a
bid to save costs.
Many New York employers are offering greater flexibility to their
work force, allowing at least some remote work even as
the pandemic recedes and recalculating their space needs.
'This is as close as we've come to that type of
scenario where there's an exodus from the city, and the recovery took 30 years,' said Kathryn Wylde, president of business organization Partnership for New York City,
to the New York Times.
'The city has to attract people for reasons other than going to the office,' Wylde added.
Wylde likens the exodus to what was experienced in the 1970s, when half of the city's 125 Fortune 500 companies moved out as the Big Apple fell into a financial crisis.
New York's financial district, which in pre-pandemic times welcomed many of the city's 1.6m-strong commuter workforce, remains
quiet (File photo from March 2021)
The situation is unlikely to resolve in the
short term with a third of leases in large Manhattan buildings set to expire in the next three years according to CBRE with
many indicating they won't need as much space when the time
comes to renew.
The amount of available space is also set to increase as new construction projects which
were started pre-pandemic, add a further 14 million square feet of office space to the books.
New York's situation appears to be unique with other cities
including Atlanta and Los Angeles showing far more positive indicators
that workers have returned to the office.
Some 24.1 percent of offices in Los Angeles are without tenants with a
21.9 percent vacancy rate in Chicago, but both cities already had high rates before the pandemic begun at
18.1 percent and 15.5 percent rate respectively.
'The other cities have become more competitive as a result of the pandemic
and the whole remote-work phenomenon,' Wylde said.
'It's going to require a real shift in public policy
toward focusing on quality of life, a positive business climate and affordability.'
Hedge funds such as Blackstone and corporate HQs like Jet Blue are pondering their futures in New York, as Covid-19 fears and tax increases make some other
states more desirable
Of course, just how quickly offices fill back
up will depend on how strict companies are with their workers.
Large tech companies with offices in New York, San Francisco, Seattle and elsewhere - such
as Spotify, Facebook, Microsoft, Twitter, Salesforce and Amazon are
extending their work-from home policies - some permanently.
But not everyone is on the work-from-home bandwagon: David Solomon, chief executive of Goldman Sachs, has said he wants employees
back in the office as soon as possible. And Citigroup executives have said they
worry about workers' productivity if they're not brought back
into the office eventually.
But their voices seem muted among the stampede of companies - many of them newer and tech-focused - that have unchained employees from their desks.
Music streaming giant Spotify has told its 2000-strong US
workforce they can work from anywhere in the country.
Spotify announced it will allow its staff to work from anywhere in the country, while still being paid at New York rates
Spotify has a 17-year lease on 16 floors of No. 4 World Trade Center in New York which costs the company $2.8m per month.
Under the company's recently-announced 'Work from Anywhere' policy, staff can elect to
live anywhere in the US while still being paid their 'New York' salary, explaining: 'Effectiveness can't be measured by the number of hours people spend in an office'.
Facebook leases more than 2.2 million square feet of office
space for its thousands of employees in New York.
It took over the lease of an entire building, the James
A Farley Building, in Midtown last August.
However, it, too, has signaled that its employees could continue to work remotely indefinitely.
Jamie Dimon, JP Morgan Chase's CEO, has been firm on his
position - he wants at least 90 percent of staff back in the office, with only 10 percent or so continuing to
work from home. In the case of his company, that account for 25,000 people around the world working
remotely, and some 200,000 working in the office.
In Hudson Yards, a corner one-bedroom, one-bath apartment in a 30-floor
high-rise, complete with a gym and pool facilities,
has also sold for $999,000
Morgan Stanley CEO James Gorman, last monthm was among the firms to take
a tough stance. He warned staff to be back in the office by Labor Day, or there'll
be tough conversations.
Gorman made it plain to the staff from the bank's Times Square office:
Get back by Labor Day or there'll be tough conversations.
'I'll be very disappointed if people haven't found their way into the office...then, we'll have a different kind of conversation.
''If you want to get paid New York rates, you work in New York.
None of this, 'I'm in Colorado and work in New York and am
getting paid like I'm sitting in New York City'. Sorry, that doesn't work,' Gorman said.
'Make no mistake about it - we do our work inside
Morgan Stanley offices, and that's where we teach, that's where our interns learn, that's where you build all the soft cues that go with building a successful career that aren't just about Zoom presentations.
'When will that occur? My leadership style has been very deliberate.
I went from one day a week from July to Labor Day last year, two days Labor Day until the end of the year, three days the beginning of this year until March and
now I am at four days.
However, while office space occupancy has declined, residential property values have continued increasing throughout the city
'I'll be very disappointed if people haven't found their way into the
office...then, we'll have a different kind of conversation.
'If you can go into a restaurant in New York City,
you can come into the office. We want you in the office,' he
said.
At the end of May, only 12 percent of office workers in Manhattan had returned to their desks,
although more than 60 percent are estimated to return after Labor Day.
According to estimates from Unacast, a location analytics company,
a net of 70,000 people fled the metropolitan region at the height
of the pandemic, resulting in roughly $34 billion in lost income.
About 3.57 million people left New York City last year but thanks
to widespread vaccination and coronavirus positivity rates
dropping, that's swiftly changing.
Crowds are swarming Manhattan sidewalks, parks, bars and restaurants at growing rates.
Within recent weeks, New York City has witnessed a liveliness not witnessed since the before the pandemic.
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