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Since the beginning of the COVID War, we have predicted the collapse of New York City’s commuter economy: most employees working at home will never return to the office full-time, robbing shops and businesses of the customers they need to survive and thus shrinking city tax revenues.
Now someone has calculated the dollar value of those losses.
The average New York City office worker currently plans to spend only 51 percent of work time in a central office, which will cut the person’s annual downtown spending from the pre-COVID average of $12,561 to $6,730, according to economist Nicholas Bloom, a Stanford University professor.
Brown presented his calculations on 24 March at the Federal Reserve Bank of New York’s “Future of New York City” conference.
The city’s office occupancy rate on a typical workday is now 36 percent, according to ID card swipes counted by Kastle Systems, slightly below Kastle’s ten-city average of 40 percent.
The $5,831 per commuter difference multiplied by the one million daily commuters that came into the city every work day pre-COVID, according to city data, would have injected $5.831 billion into the city’s economy.
If only 36 percent of those workers come to a central office on a typical workday, the annual loss would amount to $3.9 billion.
New York City is second to San Francisco in the amount of time workers plan to spend remotely but leads in the amount of downtown spending lost, Bloom estimated.
Corporate executives and New York mayor Eric Adams have pushed employees to return to central offices full-time.
However, multiple surveys have shown that workers have embraced remote work, plan to continue it, and many have vowed to quit their jobs if not allowed to work remotely, as we reported in “One-Third of U.S. Workers Will Quit if Forced to Return to Office” (9 Mar 2021).
Even so, companies will not greatly reduce their office space, Bloom predicted, adding that most workers will stay home on Mondays and Fridays and will be at central offices at the same time on other workdays.
“It’s not cataclysmic” for office landlords, he said.
In the future, about 25 percent of work time will be spent remotely, Bloom forecast, with productivity growing by 5 percent as children return to in-person schooling, remote technologies become smoother, and workers adapt to hybrid schedules.
“Employees value working from home,” Bloom said. “It’s a huge hiring and retention policy. Why wouldn’t you do something that makes them more productive and happier?”
TREND FORECAST: Even if most workers will congregate at central offices on the same day, businesses already are shedding office space and will continue to do so, as we have detailed in articles such as “Corporations Continue to Shed Office Space” (13 Jul 2021) and “HSBC Endorses Remote Work Model, Slashes Travel Budget” (14 Sep 2021), among others.
Landlords will take a hit. We reported in our Real Estate Industry Update of 13 April, 2021 Fitch Ratings’ calculation that allowing the nation’s office workers to spend a day and a half at home each week would reduce office space needs enough to cut landlords’ profits 15 percent; three days a week would slash 30 percent from profits, Fitch said.
At the back of the line, after office occupancy shrinks and retail shops and commuter-dependent businesses close, are the cities themselves. Empty storefronts and less-valuable office towers shrink the tax bases cities need to pay for services—and fewer services make a city a less-desirable place to live, driving residents out (as happened during the COVID War) and reducing revenues even further in a downward spiral.