Business

The slow return to offices will hurt the economic recovery

The Big Apple’s road to recovery will be long — and complicated.

City Hall predicted in budget documents released this week that at least 20 percent of the five boroughs’ office space will remain vacant through at least 2026.

That’s double the pre-pandemic vacancy rate, which was around 10 percent — and the first time since the crippling recession of the early 1990s that the vacancy rate has risen above 15 percent for an extended period.

And Mayor Eric Adams told the Post’s editorial board on Wednesday that continued employee resistance to returning to work in Manhattan’s massive office towers will complicate the city’s recovery from the coronavirus pandemic.

“We know that post-COVID we’re going to be dealing with a different universe, potentially a four-day work week for some,” Adams told the newspaper.

“This is really worrying,” he added. “We need to sit down with all of our business leaders, our economists — and really, we can’t stumble into post-COVID.”

New York Mayor Eric Adams speaks during the 2022 New York State Democratic Convention at the Sheraton New York Times Square Hotel on February 17, 2022.
Mayor Eric Adams told the Post editorial board that continued employee resistance to returning to Manhattan’s office towers will complicate the city’s recovery from the pandemic.
Michael M Santiago/Getty Images

Hizzoner has repeatedly argued – and many experts agree – that failure to get midtown or downtown workers back behind their desks will have knock-on effects that could further hurt the city’s recovery given the need for more jobs in the service industry such as cooks, janitors and cleaners.

“We need people in the office space again,” he said during the 30-minute interview. “This accountant has to go to the restaurant, they have to bring in the business travelers.”

“The risk for the city is on the business property tax side as these vacancy rates go up and the value of the buildings goes down,” said Sean Champion, a researcher with the state watchdog group Citizens Budget Commission.

A general view of the New York City and Midtown Manhattan skyline as seen from Weehawken, NJ on April 22, 2020.
New York City’s vacancy rate before the pandemic was about 10 percent.
Christopher Sadowski

“If values ​​are going down, or if values ​​are growing less rapidly, that ultimately means either less revenue or slower property tax revenue growth. And commercial real estate typically pays a different percentage of the city’s property taxes.”

The financial projections included in Adam’s $99.7 billion spending plan also show that just 37 percent of New York employees have returned to their offices so far, below the average of 42 percent reported in the country’s ten largest cities .

That number is up 10 percent in just the past two months as the first Omicron wave of the coronavirus pandemic receded.

Office buildings that make up the heart of Midtown Manhattan stand largely empty on March 04, 2021 in New York City.
City Hall budget documents show that only 37 percent of New York City employees have returned to their offices so far.
Spencer Platt/Getty Images

The slow pace of the return and the likely transition to an economy more geared toward work-from-home is forcing Adams to consider potential ideas for converting some vacant office and commercial space into housing.

Champion warned that the process would likely be complex and lengthy.

“It will really come down to whether our zoning codes and regulatory laws are flexible enough to allow property owners and tenants to edit those vacancies and repurpose those buildings where it makes sense,” the real estate expert said. “At the moment we don’t have enough flexibility when it comes to vacancies and floor plans.”

The mayor acknowledged during the virtual session that these assessments are just beginning.

“There’s a lot of things that we have to do as we sit down with a team of people to see what this post-COVID life is like,” he said.

Adams strove during the interview to highlight bright spots in the city’s economic picture – noting that the five boroughs are reclaiming jobs at a rate now faster than the country.

The city’s unemployment rate currently stands at 6.5 percent, more than two-thirds below the pandemic high of 21 percent.

Office buildings that make up the heart of Midtown Manhattan stand largely empty on March 04, 2021 in New York City.
The city derives an enormous portion of its tax revenue from commercial real estate.
Spencer Platt/Getty Images

This jobs hole has been so deep that City Hall budget authors estimate the Big Apple won’t return to its pre-pandemic employment levels for at least two more years, by the third quarter of 2024.

That two-year timeline is an improvement on previous projections, when officials believed it could last until 2025.

Still, the unemployment rate in New York lags behind the statewide unemployment rate of 4.6 percent and the national unemployment rate of 3.6 percent.

“We’re doing some things right. People are coming back,” Adams said.

https://nypost.com/2022/04/28/mayor-adams-slow-return-to-offices-will-hurt-economic-recovery/ The slow return to offices will hurt the economic recovery

DUSTIN JONES

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