Slow return to offices will hurt economic recovery

0
16
Slow return to offices will hurt economic recovery

The Big Apple’s road to recovery will be long — and complicated.

City Hall projected in budget documents released this week that it expects at least 20 percent of the five boroughs’ office space will remain empty through at least 2026.

That’s double the pre-pandemic vacancy rate, which sat at about 10 percent — and the first time the vacancy rate has soared above 15 percent for a sustained period of time since the crippling recession of the early 1990s.

And Mayor Eric Adams told The Post’s Editorial Board on Wednesday that ongoing resistance from employees to returning to working in Manhattan’s massive office towers will complicate the city’s rebound from the coronavirus pandemic.

“We know post-COVID we’re going to be dealing with a different universe, may go to a four day work week for some,” Adams told the paper.

“It is a real concern,” he added. “We’re going to have to get to the table with all of our business leaders, our economists — and really, we can’t stumble into post-COVID.”

New York Mayor Eric Adams speaks during the 2022 New York State Democratic Convention at the Sheraton New York Times Square Hotel on February 17, 2022.
Mayor Eric Adams told The Post’s Editorial Board that ongoing resistance from employees to returning to Manhattan’s office towers will complicate the city’s rebound from the pandemic.
Michael M. Santiago/Getty Images

Hizzoner has argued repeatedly — and many experts agree — that failing to get white-collar workers back behind their desks in Midtown or Downtown will have domino effects that could further hurt the city’s recovery by reducing the need for many service industry jobs, like cooks, custodians and cleaners.

“We need people back in the office space,” he said during the 30-minute interview. “That accountant must go to the restaurant, they must bring in the business travelers.”

“The risk to the city is on the commercial property tax side, as these vacancies rise the values of buildings fall,” said Sean Champion, a researcher at the government watchdog group, Citizens Budget Commission.

A general view of the New York City skyline and Midtown Manhattan skyline as seen from Weehawken, NJ on April 22, 2020.
New York City’s pre-pandemic vacancy rate sat at about 10 percent.
Christopher Sadowski

“If values fall, or values grow less quickly, that means ultimately either less revenue or slower growth in property tax revenue. And commercial property tends to pay a disparate share of the city’s property taxes.”

The financial projections included in Adams’ $99.7 billion spending plan also reveal that only 37 percent of New York’s white-collar workers have returned to their offices so far, which is below the 42 percent average reported across the nation’s ten biggest cities.

That figure has ticked up 10 percent in just the last two months as the initial Omicron wave of the coronavirus pandemic receded.

Office buildings, which make up the heart of midtown Manhattan, stand largely empty on March 04, 2021 in New York City.
City Hall’s budget documents revealed that only 37 percent of New York’s white-collar workers have returned to their offices so far.
Spencer Platt/Getty Images

The slow pace of return and likely transition to a more work-from-home-centric economy is forcing Adams to eye potential ideas for converting some of the empty office and commercial space into housing.

Champion warned the process would likely be complex and lengthy.

“It’s really going to come down to whether our zoning regulations and regulation laws are flexible enough to allow property owners and tenants to work through these vacancies and repurpose these buildings where it makes sense,” the real estate expert said. “Right now, we don’t have enough flexibility where there is vacancy and floor plans make sense.”

The mayor acknowledged during the virtual sit-down that those evaluations are only beginning to get underway.

“There’s a lot of things that we must do when we’re going to sit down with a team of people to see what this post-COVID life look like,” he said.

Adams took pains during the interview to highlight the bright spots in the city’s economic picture — pointing out that the five boroughs are gaining jobs back at a rate that is now faster than the country.

Currently, the city’s unemployment rate is 6.5 percent, down more than two-thirds from the pandemic high of 21 percent.

Office buildings, which make up the heart of midtown Manhattan, stand largely empty on March 04, 2021 in New York City.
The city draws a tremendous amount of its tax revenue from commercial properties.
Spencer Platt/Getty Images

That jobs hole was so deep that City Hall’s budget writers estimate the Big Apple will not return to its pre-pandemic levels of employment for at least another two years, until the third quarter of 2024.

That two-year timeline is an improvement over earlier projections when officials believed it could take until 2025.

Still, New York’s rate lags the 4.6 percent statewide unemployment rate and the 3.6 percent national rate.

“We are doing something right. Folks are coming back,” Adams said.

Source link