Simon Mitchell’s office in Union Square, New York City has had an eerily empty feel since the Covid pandemic. With four in five desks unused in a space with capacity for 300, the marketing manager only goes in when he feels like he might have some company.
Union Square was once known for its bustling bars and restaurants, into which office workers would swarm as they enjoyed their fast-paced city lives. The change in the area today is stark.
Mr Mitchell, his partner and their one-year-old baby moved to Queens just after the pandemic. He has no intention of returning to the office full time.
“Rents are sky high and if you can avoid paying City prices on food and have a flexible lifestyle, why would you go into the office more?” he says.
Not even cheap subway commuting could entice him or his colleagues back to the office, Mr Mitchell adds. “I wouldn’t even consider taking a job that didn’t offer flexibility”, he says.
While New York is starting to show signs of life, only around half the number of workers that should be in the office have returned more than a year on from the pandemic. Vacancy rates for office buildings in central New York have hit 22.7pc, up 11.4pc on pre-pandemic levels.
Meanwhile, the level of workers returning to the office has plateaued at around 60pc, data from The Real Estate Board of New York shows. The consultancy group has warned of a coming wave of “zombie” buildings rendered barely functional due to low vacancy rates.
Some skyscrapers are already lifeless. The 47-story tower at 60 Wall Street has sat empty since 2021, when Deutsche Bank – its only tenant – relocated uptown, to the edge of Central Park. The building’s owners, Singapore’s sovereign wealth fund and Paramount Group, have undertaken an expensive renovation in order to tempt in new tenants.
Eric Adams, the City’s mayor, has urged workers to return to the office as the city struggles with a shifting landscape. He said last year: “You can’t run New York City from home”.
But employees’ desire for flexibility is higher “than ever”, says David Smith, head of Americas insights, global research at Cushman & Wakefield New York. “And this demand is greater here than in any other part of the world,” he adds.
White-collar workers are fleeing New York in huge numbers for a life free from commuting, says Mr Smith, as well as the option to spend more time on their families and other personal pursuits.
“It’s particularly people in their late twenties and thirties who are unwilling to return to the office full time,” he adds.
The lack of people returning to the office has hit the local economy, with remote work costing New York around $4,661 (£3,750) annually for each worker, according to Bloomberg, as employees spend less on food and entertainment at businesses around their offices.
There is currently around 22.7 million sq ft of sublet space in New York, with this figure rising as companies look to shrink their office footprints.
Agents note that the majority of companies releasing space are in the tech or media industries. Spotify recently put 200,000 sq ft on the market for sublease at 4 World Trade Center, vacating five of its floors. Facebook also announced it is subletting roughly 250,000 sq ft of their 1.9 million sq ft office space in Hudson Yards.
In response, companies have mandated a return to the office. Blackrock, the world’s largest asset manager, on Tuesday announced that staff must be on-site for at least four days a week.
In a memo, bosses wrote: “Career development happens in teaching moments between team members, and it is accelerated during market-moving moments, when we step up and get into the mix. All of this requires us to be together in the office.
“We will shift to at least four days per week in the office, with the flexibility to work from home one day per week. This new approach begins on 11 September.”
Other companies have put similar policies in place, JP Morgan recently told its senior bankers to return to the office for a full five days, adding that slackers would be punished for poor attendance.
At the time, the bank said: “As we’ve returned to more normal patterns in our lives and work, we can all appreciate the many benefits of in-person engagement.
“We believe this is especially true when it comes to the importance of being in the office – being together improves the speed of decision making, while also providing valuable opportunities for spontaneous learning and creativity, as well as allowing our professionals to learn through our apprenticeship model.”
Blackrock’s announcement came after it committed to downsizing its headquarters in New York. Fellow asset manager Macquarie and Twitter have also shrunk their footprint.
Surprisingly, the most famous buildings in New York are not the most attractive to big name companies – and have not been for a long time, says Andrew Lim, JLL New York City research director.
LinkedIn’s head office, located in the Empire State Building, is leased for five more years. Agents have speculated that the business will look to reduce the space it occupies once its tenancy is over, with a move to more modern offices in mind.
“These older buildings have characteristics that are not as popular today with occupiers who tend to prefer newer buildings that have amenities, modern finishes and more customizable layouts,” Mr Lim says.
According to JLL, around 25 million sq ft of office space in Manhattan alone has sat empty and on the market for more than 24 months. Agents and investors believe that the next logical step would be to repurpose these buildings, with around six million sq ft of office space being considered for conversion into residential or retail space, among other uses.
On the mainland, Washington DC is leading the way by committing to converting 40 offices into residential buildings, according to Cushman & Wakefield. That trend is already spreading to the east coast, with at least four office buildings due to be converted. If it continues, New York’s empty skyscrapers could become towers of housing.
Source: finance.yahoo.com