Manhattan’s commuter workforce is in town on Tuesdays, Wednesdays, and Thursdays, but thins out on Mondays and disappears on Fridays, according to Stanford University data analyzed by Bloomberg.
At eight large Manhattan office towers, Monday’s foot traffic is only at 55 percent of 2019 levels and 48 percent on Fridays, Bloomberg reported after analyzing data from Placer.ai.
In the city overall, office attendance is at a scant 43 percent of pre-COVID numbers, Kastle Systems reported. The company tracks swipe card data in more than 2,000 office buildings in 10 major U.S. cities.
With about 30 percent fewer person-days in the office post-COVID, the island’s workers are spending $12.4 billion less each year at bars, restaurants, shops, and other venues that survived on commuter trade before the COVID War began.
That’s about $4,660 less coming annually from each of the city’s 2.7 million pre-COVID commuters.
Many shops and eateries in the financial district have already shuttered, Bloomberg noted.
During the last six months of 2022, car hires on Mondays and Fridays were about 33 and 38 percent of pre-pandemic levels, respectively, according to an analysis of about 400,000 rides over the last three years. On Thursdays, the rate moves up to about 43 percent.
The money that used to be spent in Manhattan is now being dispersed among New York’s other boroughs, where remote workers live and where foot traffic has returned to at least 85 percent of its 2019 levels, compared to 78 percent in Manhattan.
In Brooklyn’s bars and restaurants, the number of sales shot up 48 percent in last year’s fourth quarter, compared to the same period in 2019, according to data gathered by Square.
Average Monday retail spending in October rose 18 percent in Brooklyn, 28 percent in the Bronx, and 21 percent in Queens; Manhattan’s increase was a negligible 2 percent from 2019’s final quarter, Mastercard data showed.
Without a full complement of five-day commuters, the value of Manhattan’s office edifices could plummet 40 percent, which would cost the city $5 billion a year, or about 5 percent of the entire city’s annual budget.
The loss of those commuters also reduces New York’s sales tax revenue.
The city’s transit system of subways and buses has recovered only 64 percent of its 2019 ridership. If numbers fail to improve, the system will be running more than $2 billion in the red through 2026, Bloomberg noted.
As pandemic aid winds down, the transit agency is ready to cut services on seven subway lines on Mondays and Fridays, including the one line connecting Manhattan and the Bronx.
These budget craters “will need to be plugged with new taxes, lower spending,” Columbia University professor Stijn Van Nieuwerburgh said to Bloomberg.
He has called New York’s gloomy fiscal future an “urban doom loop.”
“The fiscal threat to tax revenue verges on the existential: What is the value of a city when workers don’t need to be there anymore?” Bloomberg asked.
“If less income tax is being paid in New York City, then it’s hard to figure out how to capture enough value to maintain the subways and invest in the schools and keep the city safe and clean and all the things that really matter,” New York City comptroller Brad Lander said in a Bloomberg interview.
Manhattan’s plight is reflected in other commuter-dependent downtowns.
Spending in shops, restaurants, and service businesses in San Francisco’s core is down by $3,040 per year and by $2,387 in Chicago, the Stanford data revealed.
In London, only 6 percent of workers said their bosses expect them in the office five days a week, a city government study found. About 14 percent of open jobs in Tokyo offer mostly remote work, compared to 3 percent in 2019, according to job website Indeed.
TREND FORECAST: At the beginning of the COVID War, we correctly predicted the office real estate bust. See:
● “Commercial Real Estate Bust? Office Occupancy Rates In Toilet” (29 Mar 2022)
● “Return To Offices Postponed: Commercial Real Estate Bust?” (14 Sept 2021)
● “As Forecast: NYC Commercial Real Estate Crisis Worsens” (24 Aug 2021)
● “Commercial Real Estate Crisis?” (3 Aug 2021)
● “Will Delta Variant Kill Commercial Real Estate?” (3 Aug 2021)
● “Commercial Real Estate: Boom Or Bust?” (25 May 2021)
● “NYC Commercial Real Estate Suffers” (15 Dec 2020)
● “Manhattan’s Commercial Real Crash” (21 Sept 2021)
● “Commercial Landlords Scrambling” (27 April 2021)
● “Work From Home = City Real Estate Down” (20 Oct 2020)
● “Spotlight: Top Trend 2023, Office Building Bust” (17 Jan 2023)
● “As Forecast: Business Office Bust Begins to Bite” (20 Dec 2022)
● “Big Tech Dumps Office Space” (22 Nov 2022)
It has taken Bloomberg, the Boston Globe, The Wall Street Journal, and other major mainstream media outlets more than two years to recognize this trend and call attention to it.
TREND FORECAST: In our Top Trend 2023 forecast of this next phase in the office building bust (3 Jan 2023), we predicted that the office property crisis will accelerate through 2023 as landlords face stiffer competition to get and keep tenants, wrangle with local governments to try to minimize their tax assessments, and see their margins shrink—many to the point of disappearing.
And for many with adjustable rate mortgages, the higher interest rates rise, the more they have to pay on their loans.
To survive, many landlords will let go of older buildings needing maintenance or repairs, either offering them at fire-sale prices or handing the keys back to lenders.
Property owners will consolidate, those having deep pockets or access to cash buying up others for cheap.
As property values are reassessed downward, cities will confront hard decisions about which workers and services to cut.
And as for converting offices into residential apartments and/or condominiums, as we have noted in previous issues of The Trends Journal, thousands of office buildings, especially older ones, across the U.S., are doomed for reasons we explained in “Plan to Turn New York’s Vacant Hotels To Housing Not Working” (5 Apr 2022) and “Wall Street, Dead Street. Office Buildings Going Condo” (28 Jun 2022).