As part of New York’s economic lockdown, major businesses in Manhattan dispatched hordes of employees to work from home. Now those businesses are discovering that many of those workers need not come back downtown to do their jobs.
Executives at Barclay’s, JPMorgan Chase, and Morgan Stanley have said it is highly unlikely that all of their now at-home workers will return to the city’s office towers.
Nielsen, the media research firm, has decided its 3,000 workers can stay at home and come into centralized offices only occasionally, even after the lockdown ends.
In figuring out how to structure effective virtual workforces during the lockdown, companies discovered that employees and work processes could function effectively without being in the same physical place.
As a result, these corporations are realizing they no longer need to lease millions of square feet of office space at New York’s stratospheric prices.
That’s good for the companies, but it threatens the economic ecosystem that depends on hundreds of thousands of workers flooding the city every weekday.
Businesses ranging from restaurants and bars, newsstands, and coffee kiosks to barber shops and specialty boutiques could lose a major part of their trade without the steady stream of commuters.
Empty offices also would deflate rental rates. If the vacant spaces do not fill back up with new tenants eager for a Manhattan address, the lower rates would crimp the stock-market value of commercial real estate companies involved.
In addition, lower property prices would reduce New York City’s property tax revenue, which, in turn, would threaten to reduce the number of police and firefighters or the frequency of trash collection, among other services.
Some landlords argue that remote work will not last in any significant way because face-to-face interactions are essential to productivity. “The socialization and collaboration of the traditional office is the winning ticket,” said Steven Roth, chairman of Realty Trust, one of the city’s largest commercial landlords.
But after the quarantine, “our habits and how we use office space will absolutely be different,” said Gavin Fraser, CEO of the Brooklyn-based Small Planet software firm. “It took the lockdown to accelerate those trends.”
TREND FORECAST: Many more white-collar jobs will move from centralized offices to home offices as companies seek to cut costs. This is a long-term trend that the economic lockdown has sped up.
The collapse in commercial real estate values is just beginning, indicated by the $45 billion in commercial mortgages that were bundled into investment vehicles and are now overdue for their April mortgage payments.
Again, this new trend will decimate commercial real estate prices across the nation… and around the world.
