Pandemic eats into Manhattan property market

David Kenny, Nielsen's CEO, said the company plans to convert its New York offices into team meeting spaces where workers gather once or twice a week.

"I have done an about-face on this," he told The New York Times, "If you are coming in and working at your desk, you certainly could do that from home."

He added, "We have leases that are coming due, and this is absolutely driving those kinds of decisions."

Real estate company Halstead has 32 branches and more than 1,000 agents across the city and region, but its CEO Diane M. Ramirez now conducts business through video calls.

She asked, "Looking forward, are people going to want to crowd into offices?"

Facebook, Google and The New York Times have extended working-from-home practices until the end of this year, while Twitter has told its hundreds of employees in the city they can work remotely all the time if they want to and if their positions allow them to do so.

Global financial services company JPMorgan Chase, which until last year was the largest office tenant in New York City, said it is reviewing the number of workers who will be allowed to return to its offices.

If a large number of companies opt for employees working from home rather than in the city, this could lead to the size of many offices being reduced, saving employers a significant amount and leaving landlords with empty floors and falling rents as demand declines.

There is also the issue of real estate taxes, which provide about one-third of New York's revenue and help pay for basic services such as the police and trash collection. Falling tax revenue would worsen the city's financial crisis and hinder its recovery.

If large numbers of workers no longer travel into the city five days a week, the mass transit system, which is already in the red due to a drastic fall in the number of users during the pandemic, could see revenue continue to fall.

Thousands of businesses catering to white-collar employees in downtown areas, including restaurants, bars, convenience stores and upscale shops, could experience a decline in customers which would erode profit margins and force more closures.

Reduced sales tax revenue would eat into the city budget, leading to fewer services and strengthening the desire to work from home.

Increased productivity

Kate Lister, president of research and consulting company Global Workplace Analytics in San Diego, California, said employees working from home half the time would save from $2,500 to $4,000 a year by spending less on travel, food and parking. Reduced commuting time would save such workers the equivalent of 11 days a year.

"Home will become a place for increased productivity and more contemplative work－even with the cacophony of children and pets," Lister said.

"People working from home are more satisfied and more efficient. Does it make sense to traipse into town to go to the office and then across town to meet a client when it can be done on Zoom?"

Operating from a spare bedroom rather than an office several days a week might also do away with the need to buy expensive clothes for work, as most employees don't feel the need to dress up for video conferences, Lister said.

However, many insiders feel that office space will always be in demand.

Anthony E. Malkin, CEO of Empire State Realty Trust, which owns the Empire State Building and eight other properties in Manhattan, said large industries, including a fast-growing technology sector, would drive an economic rebound and the desire for office space.

The absence of social contact which people are experiencing today is not sustainable, Malkin said. "Can you pay bills from home? Can you process things from home? Yes. But can you work as a team from home? It's very challenging," he said.

Mary Ann Tighe, chief executive of commercial real estate services company CBRE's New York Tri-State Region, said offices will undoubtedly change, with some employees working remotely, but workers will still want face-to-face interaction.

Referring to working-from-home arrangements, she said, "This isn't the nature of office work."

Steven Roth, chairman of Vornado Realty Trust, one of the largest commercial landlords in New York City, said during a company earnings call this month: "We do not believe working from home will become a trend that will impair office demand and property values. The socialization and collaboration of the traditional office is the winning ticket."