White-Collar New Yorkers Plan To Axe Time Spent In Office
More than two years after the virus pandemic locked down New York City and upended the world of work, there are continued signs of storm clouds gathering over the office real estate sector.
According to Bloomberg, citing a new study by Nicholas Bloom, an economics professor at Stanford University, the average white-collar worker plans to halve the time spent in the office and reduce discretionary spending in the metro area by $6,730. Before the pandemic, those in offices spent on average $12,561 in a pre-pandemic world.
On Thursday, Bloom revealed his findings at a Federal Reserve Bank of New York conference. He said hybrid and remote work could cost New York around 5-10% of its city-center population. The implications of declining white-collar workers traversing city streets from home to work could dampen the economic recovery.
The city’s unemployment rate is shockingly high (7.6%) compared with the rest of the country at 3.8%. High unemployment is due to the lack of white-collar workers because so many industries in the city are dependent on them using their services, such as the restaurant and entertainment industry.
“People used to live in cities because they had to come into the office five days a week,” said Bloom, who surveyed 5,000 workers and 1,000 businesses about pandemic-related changes to work habits.
“If they don’t have to, and they want a backyard, they move out to the suburbs. We see that across cities, and call it the doughnut effect,” he added.
Bloom’s survey comes as Manhattan landlords have struggled with a glut of commercial real estate properties. It was reported by Savills Research this week that office space available in the city is at 19%, the highest since the dark days of the Dot Com bust (2000).
There will be no recovery in the city’s office sector unless workers return to the office.
Keycard swipes tracked by security company Kastle Systems show NYC offices are about 36% occupied, far below pre-COVID levels.
As vacancy rates continue to hit levels not seen since prior bust cycles, the world’s largest commercial real estate owner, Blackstone, is giving up on one of its Midtown Manhattan office buildings. There is trouble brewing in the office space market.
“That’s an indication that something not great might be starting to bubble up within the office sector,” Lea Overby, a Barclays analyst covering the commercial mortgage market, told Axios.