People always ask me how NYC has fared in the aftermath of the pandemic. To me, it still seems like a ghost town in many areas. My office is in the NoMad neighborhood, just north of Madison Square Park. From my perspective, I see residential areas coming back to life, and business districts slowly rebounding. Times Square is busy but not with wall to wall tourists as it was for many years. Office buildings are not empty, but certainly not fully-occupied. There a number of reasons for this, among them the work-from-home culture and people being concerned about commuting to New York City on public transit. The result now and in the near future is likely to be a glut of available office space.
Anecdotal evidence and statistics tell the story. I cannot tell you how many times I have spoken to clients, other professionals and friends about what’s happening in the office buildings where they work (or worked!), but the common thread is that they are unhappy and concerned that they took that extra floor or signed a new lease in January 2020 or that they are thrilled the didn’t and are glad their office leases are coming to an end. On the statistical side, there are some concerning developments. CNBC recently reported that only about half of office workers are back in their offices. Fully-remote work levels are up – 16 percent of workers are fully remote. Additionally, the vast majority of businesses report that hybrid work will be predominant moving forward. Studies show that less than 10 percent of commuters are commuting into the NYC full time. The New York Times reported in September that subway ridership is only 77 percent of pre-pandemic levels.
Manhattan in particular seems to be bearing the brunt of this decrease. While New York is by no means empty, the office buildings in the heart of New York (midtown Manhattan) have not returned to their pre-pandemic capacities. By contrast, Crains New York reports that the outer boroughs (Brooklyn, Queens, Staten Island, the Bronx) are seeing business growth where people are continuing to work remotely or starting new businesses. Trends in other cities show that NYC is something of an outlier – outside urban downtowns elsewhere in the country are full and getting busier, perhaps because many people moved from NYC or other high cost of living cities and will not return.
So, what does this all mean for New York City? Crains New York reported this month that publicly traded REITs have seen their stocks tumble. SL Green (one of New York’s largest office building owners) is near its lowest since the start of the pandemic. Other large office building companies are seeing their lowest stock prices since the early 2020 as well. Occupancy is below 50 percent. Of course, this begs the question of what happens when new office buildings come on line (construction that started before the pandemic continued and new buildings will likely add to the glut). Another concern is what happens when leases expire. Our office lease in NoMad is up for renewal in a few years. Our firm grew since 2020 and 2021, but will we need the same office space in a few years? I don’t know, but this is certainly a question being asked by other businesses in NYC.
