New York is still feeling the impact of remote work

Although the pandemic is over, the effects are still being felt worldwide. This is undoubtedly the case in New York. With the return-to-office policy of many companies, you would think things are back to normal, but this is not quite the case.

A recent study by “The Partnership for New York City” shows that only 9% of employees are back in the office five days a week. The survey was conducted over two weeks and ended in mid-September. The research was conducted using data from major employers, real estate developers, and business leaders.

Although almost half of the employees were in the office at least once during a typical working week, nearly 37% were in the office at least three days a week.

Many companies have realized that remote work is feasible for their company. Others have now embraced working from home as part of their company culture. Allowing employees to work from home (At least partly) is now viewed as a company “perk or benefit,” which many employees have tasted and are reluctant to let go of. Still, other employees have moved out of the city to quieter and cheaper neighborhoods.

The projection is slightly gloomy for New York commercial real estate. Landlords and investors should brace for more pain ahead. A recent study released by the National Bureau of Economic Research suggests that properties could take up to 10 years to get back to what they were worth in 2019.

The researchers developed a pricing model which included a variety of data. They concluded that office real estate could lose up to 39% of its value over the long term, wiping out $453 Billion of value. Occupancy rates have already taken a massive hit, with occupancy dropping drastically from about 95% in February 2020. Now in late 2022, occupancy rates are still below 50%.

Lease revenue has taken a notable hit as well. Over the past six months, newly leased office space decreased to 59 million square feet, from 253 million square feet per year, before the pandemic.

Meanwhile, there have been calls for government intervention to convert commercial real estate sectors into multifamily homes. Arpit Gupta, a finance professor at NYU, said this would help with the vacant office buildings but could also help alleviate the high rent costs across the city. “This kind of conversion is very appealing because it addresses both the declining value of commercial office demand and the pressures for affordable rents in these cities.”