Friday, June 25, 2021

New York City-- Not Back Yet

Is New York City coming back? Coming back from the dead, that is. True enough, the streets are more crowded than they have been in quite some time. Stores and restaurants have reopened. And yet, you cannot just flick a switch and undo the damage that an incompetent mayor and an incompetent governor have inflicted on the Big Apple. Cities and states with better political leadership are doing far better than New York.

We live in midtown Manhattan, so we are normally interested in the issue. We have been following it, religiously, on this blog. Today, we read Steve Cuozzo’s excellent report in the New York Post. Let’s say that Cuozzo is less than optimistic. The numbers bear him out.

As it happens, midtown office buildings continue to be shadows of their former selves. 

“New York City Is Back,” proclaims City Hall and even the doom-peddling New York Times. A renaissance may appear to be afoot, thanks to the vaccines’ blessed success in clobbering COVID-19.

But the Big Apple won’t truly be back until employees return to their offices in significant numbers. So far, that isn’t remotely close to happening, especially not in still-ghostly Midtown. Meanwhile, employers and elected officials mostly stand by and hope for the best.

According to the widely followed Kastle Systems Back-to-Work Barometer, New York City metro-area office occupancy ticked up last week to a feeble 21.7 percent, from 20.7 percent the week before (Kastle doesn’t break out data specifically for Manhattan). The figure is 49 percent in Dallas, 48 percent in Houston and 29 percent in Philadelphia.

If things are not as bad in other cities, why is New York special?

Why is Gotham lagging so badly? Work-from-home has become habitual for many people who experienced or witnessed the city’s terrible viral carnage of spring 2020 — regardless of the loss of creativity and decline in productivity for the companies that pay their salaries. Some won’t give up wheel-spinning Zoom meetings until and unless government and employers pry them off their laptops.

Cuozzo makes an important point. People have become habituated to working at home. They have reconstructed their lives and have significantly modified their daily routines. They are loath to change back, and cannot do so easily. You do not just flick a switch and change an ingrained habit.

And yet, if workers do not return to office towers, the long term consequences will be calamitous:

But short of a mass return to offices, the city faces a catastrophic loss of tax revenue and permanent closures of stores, restaurants, hotels and service businesses in Midtown, Midtown South and Downtown.

Mostly empty buildings haven’t yet translated into major losses for landlords, only because companies have long-term leases on which they continue to pay rent. But those tenants are keeping close eyes on future workplace trends. If they were to eventually shrink their square footage by even 25 percent, it would have a devastating impact on landlords — and on property taxes and other real-estate-related taxes, which contribute more to the city treasury than Wall Street does.

The biggest threat to New York today is-- permanently empty office towers:

Yet the mayoral candidates barely mentioned the crisis in their campaigns. This, despite the magnitude of the threat: While street mayhem will certainly damage the city’s economic future, permanently empty towers will completely destroy it.

Cuozzo’s solution-- forcing workers to return to the office. No more Mr. Nice Guy:

Except in cases of demonstrable hardship, companies should require their staffs to come back — period. Too many have forgotten that it’s their right to do so. Long-term work-from-home isn’t viable for most businesses, and any boss worth his or her salary wants face-to-face interaction with team members.

Obviously, the value and the virtue of face-to-face interaction is being debated in various places. For the record, I take Cuozzo’s side and believe that it matters in an office environment. 

And by the way, reducing crime, especially crime in the subways, would go a long way to encouraging people to venture out of their cocoons. The recent chaos, or rave, in Washington Square Park, and the general insouciance of the forces of order, sent precisely the wrong message.

1 comment:

markedup said...

When things are not going the way the state desires, forcing people to do what the state wants, rather than what the people want, is so 20th century.

The vast majority of office work does not require presence. I'm writing this from a hospital room (I'm the visitor, not the patient) Meanwhile, I'm having conversations with my coworkers, despite being officially on vacation.

Any global company is very much aware of this. It's difficult to say "you must be in an office to interact with your coworkers," when most of your coworkers are in different COUNTRIES.