Half-empty offices in post-COVID Midtown not easy to fix

Is the office building in Midtown half empty or half full?

As white-collar workers view the five-day work week as optional, real estate investors, terrified of losing billions, are trying to convince the city to let them do something else with their properties, from casinos to housing. But a half-occupied office building could cost New York more.

As the city approaches the third anniversary of the COVID lockdown, Manhattan’s skyscrapers are hovering around the 50 percent mark.

Steven Roth, head of commercial landlord Vornado, told investors this month that as far as the workweek goes, “Friday is dead forever. . . . Monday is touch and go.”

And with some smaller tenants giving up their office space entirely or taking on less space at the end of the lease, vacancy rates are high and rising. The amount of office space available for rent has doubled since 2019.

The vacancy rate is at a record 22.2%, double the pre-COVID average, according to Cushman & Wakefield. (The city controller has taken to calling this “accessibility level,” which sounds sweeter.)

Large homeowners are returning the “keys to the bank” for some buildings, especially middle-aged buildings, RXR’s Scott Rehler said. puts it down.

Property owners and investors who have lent them money don’t want to lose their shirts, so they want to shrink the office market: fewer office space offers, higher prices for what’s left.

At the same time, Manhattan executives who walk around their offices and see empty desks are annoyed that they have to pay for an empty seat.

In the meantime, you need housing and, apparently, a casino.

Not so fast. This is one of those cases where the city’s momentum works in its favor.

First, half empty is not a failure. Getting office workers to Manhattan two or three days a week is a big deal compared to having no days a week.

This is good for both employers and employees. People benefit from teamwork and face-to-face meetings on the days they travel, and more focus on single tasks on the days they stay at home.

Stay up to date with today’s most important news

Stay up to date with the latest news with the Evening Update.

From this point of view, cheaper office space is good. If employers are responding to fewer people coming in by reducing the space for each worker, they are simply creating a miserable office environment. People will go back to staying at home when they can, or just be less productive.

With lower rents, employers are less tempted to do so.

Second, having a main office center, while dismissed as old-fashioned by urbanists, is good for New York.

In fiscal year 2021, office real estate paid about $7 billion in annual taxes, mostly real estate taxes, according to the State Comptroller. This is about 11% of all taxes.

This does not include state and city income taxes, or sales taxes paid by passengers.

A worker who commutes to Manhattan two or three days a week is still a New York City taxpayer by law. A worker who stays at home and lives in New Jersey or Connecticut will not become one at some point.

In addition, converting too many old office spaces into homes, casinos or multi-storey ice rinks also discourages small employers.

Meanwhile, big banks and law firms, companies that can rent class A+ premises, require workers to show up four or five days a week.

However, if we push out small employers, we become more dependent on large financial firms, which means we are more vulnerable to mass layoffs during a recession.

Finally, the housing part. Office buildings, even small ones, are not easy to convert into housing – they have too much interior space without windows.

Developers will need tax incentives to convert units of measure.

But New York City already has 60,000 vacant rent-controlled apartments, many of which are because homeowners don’t feel the required repairs to vacant apartments are worth the rent they can legally charge.

Solving this problem before you spend tens of billions just to lose office space makes a lot of sense.

Also, converting an old office building into affordable housing here and there doesn’t create a large enough community to support schools, grocery stores, and the like.

It worked downtown because there was already a huge Battery Park City apartment complex nearby.

However, build too much housing and you will make the area unattractive for office tenants.

For now, what we’ve been doing for almost three years still makes sense: do nothing and hope people get back to work more often.

Nicole Gelinas is a contributing editor for the City Journal of the Manhattan Institute.

Content Source

News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News

Related Articles

Back to top button