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About a third of office businesses in New York City will reduce their needs for space in the next five years, according to a survey this month by the nonprofit Partnership for New York City.
Most businesses expect workers to spend no more than three days a week in central offices, allowing companies to implement desk-sharing and other space-saving arrangements.
Only 28 percent of the city’s one million office workers are in central offices on a typical weekday, according to the survey, better than the 23 percent October’s survey found but still far short of the 41 percent employers last spring said would return by last month.
Employers now think about half of office workers will be in central locations each weekday by February. “Employees’ preference for remote work ranked second” behind fears of the COVID virus, the Partnership said.
About a third of companies dangled free or subsidized meals, transportation allowances, and help with child care to lure workers back to their cubicles.
TREND FORECAST: The survey’s finding emphasizes our forecast made more than a year ago: as commuters disappear, entire urban economies will go with them.
As we wrote in “Return to Office Postponed: Commercial Real Estate Bust?” (14 Sep 2021), the loss of commuters to city centers will doom the economic ecosystem of restaurants, shops, gyms, food trucks, and other businesses that desk workers support.
The more people who work remotely, the further commercial real estate prices will fall. In turn, businesses and transportation systems that relied on commuters will economically suffer, as will the workforce once employed in those sectors.
The shift to working at home will redefine economic ecosystems, especially in urban centers. Commuters buy lunch, gifts, clothes, gadgets, and other items in locales where they work; as workers stay home, downtown stores and restaurants will lose their traditional customer base and gas stations along commuter routes will see business plummet.
At the same time, owners of commercial real estate will face a reckoning as they slash rents to lure a shrinking base of tenants, forcing them to demand property tax concessions from cities that will struggle even more to maintain police, fire, and public works infrastructures.
As a result, downtown businesses will shrink in numbers. Lease prices and real estate values will continue to spiral down until they reach a level businesses and investors will accept.
The smallest commercial landlords, which have fewer reserves than the Bigs, will sell out or go bankrupt; property owners and investors with deep pockets will buy those properties and grow even bigger.
At the bottom of this downward spiral: city treasuries, which depend heavily on property taxes for revenue. (Property taxes account for more than 40 percent of New York City’s annual budget.) Less revenue means fewer services, leading to a reduced quality of life, persuading even more people to move away, further reducing property tax revenue.
Consequently, we maintain our forecast from “New York Office Vacancies Set Record” (13 Jul 2021): To keep residents, businesses, and property tax revenues, these cities will become laboratories for innovation in everything from marketing their brand identities to negotiating with businesses over taxes to the ways in which essential services are provided.