Office Building Bust

New York City’s economy added just 13,500 jobs in December, leaving payrolls about 12 percent smaller than before the COVID era. 

That translates to 300,000 fewer jobs in town.

The city’s unemployment rate is now 6 percent, almost double the national rate, The New York Post reported.

Black and brown communities have lost the most jobs and are regaining them slower than other groups, according to a recent study by The New School.

“New York City had some of the strictest COVID mandates and, because we’re so reliant on office workers, tourists, and transient workers, we had additional struggles,” Andrew Rigie, executive director of the New York City Hospitality Alliance, said to the NYP.

“Accommodations and food services are still down,” he added. “Nearly 50,000 jobs [in hospitality] are missing compared to [pre-COVID] levels. That’s the size of a small city.”

The hotel industry alone is 13,000 jobs and 11,000 rooms smaller, lagging the industry’s recovery in London and Paris, according to Vijay Dandapani, CEO of the New York City Hotel Association.

Hospitality and construction are the slowest industries in the city to recover.

New York lost roughly one million workers in March and April 2020 as politicians slammed the city shut against the virus. The city now has about four million people working in it.

“The city’s job losses as of fall 2022—two and a half years after [COVID’s] onset—stem mostly from the employment decline in lower-paid, face-to-face industries most immediately affected by public health business restrictions and subject to the lingering effects of changed commuting and hybrid working patterns,” James Parrott, director of The New School’s study, told the NYP.

The city’s own workforce has shrunk 6.4 percent from 2019, the largest decline since 2008 at the onset of the Great Recession, the report said.

The mayor’s office expects the Big Apple’s labor force to return to pre-COVID levels by 2025, while governor Kathy Hocul has predicted it could take a year beyond that.

Much of the public- and private-sector job loss is due to the rise of remote and hybrid office work. 

Pre-COVID, as many as a million commuters came into the city each day. Now the office occupancy rate is a scant 47 percent of what it was in 2019, according to city figures.

“It’s a vicious cycle” that when commuters stop commuting, retail and service workers lose their jobs, Tom Grech, president of the Queens Chamber of Commerce, commented to the NYP.

TRENDPOST: We were the first to forecast an office building bust when the COVID War began in 2020. And in the 22 June 2021 Trends Journal reported extensively on the financial implications of the swift shift from traditional office work to working from home. (See “OFFICE WORKERS’ SLOW RETURN ENDANGERS LANDLORDS, CITY FINANCES” and “ONE-THIRD U.S. WORKERS WILL QUIT IF FORCED TO RETURN TO OFFICE.”)

And now our Top Trend 2023, “Office Building Bust” has become clear to the mainstream media.

In our forecast, 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.

As interest rates continue to rise—as they will through at least the first half of this year—many landlords with adjustable-rate mortgages or loans needing to be refinanced will hand their keys back to their lenders or offer their buildings for sale at fire-sale prices.

Property owners will consolidate, with those having deep pockets or access to cash buying up others on the cheap.

As property values are reassessed downward, cities are confronting hard decisions about which workers and services to cut, a trend now biting into municipal budgets that we reported in “As Forecast: Business Office Bust Begins to Bite” (20 Dec 2022).

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