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People always ask me how NYC has fared in the aftermath of the
pandemic. To me, it still seems like a ghost town in many areas. My
office is in the NoMad neighborhood, just north of Madison Square
Park. From my perspective, I see residential areas coming back to
life, and business districts slowly rebounding. Times Square is
busy but not with wall to wall tourists as it was for many years.
Office buildings are not empty, but certainly not fully-occupied.
There a number of reasons for this, among them the work-from-home
culture and people being concerned about commuting to New York City
on public transit. The result now and in the near future is likely
to be a glut of available office space.
Anecdotal evidence and statistics tell the story. I cannot tell
you how many times I have spoken to clients, other professionals
and friends about what’s happening in the office buildings
where they work (or worked!), but the common thread is that they
are unhappy and concerned that they took that extra floor or signed
a new lease in January 2020 or that they are thrilled the
didn’t and are glad their office leases are coming to an end.
On the statistical side, there are some concerning developments.
CNBC recently reported that only about half of office workers are
back in their offices. Fully-remote work levels are up – 16
percent of workers are fully remote. Additionally, the vast
majority of businesses report that hybrid work will be predominant
moving forward. Studies show that less than 10 percent of commuters
are commuting into the NYC full time. The New York Times reported
in September that subway ridership is only 77 percent of
pre-pandemic levels.
Manhattan in particular seems to be bearing the brunt of this
decrease. While New York is by no means empty, the office buildings
in the heart of New York (midtown Manhattan) have not returned to
their pre-pandemic capacities. By contrast, Crains New York reports
that the outer boroughs (Brooklyn, Queens, Staten Island, the
Bronx) are seeing business growth where people are continuing to
work remotely or starting new businesses. Trends in other cities
show that NYC is something of an outlier – outside urban
downtowns elsewhere in the country are full and getting busier,
perhaps because many people moved from NYC or other high cost of
living cities and will not return.
So, what does this all mean for New York City? Crains New York
reported this month that publicly traded REITs have seen their
stocks tumble. SL Green (one of New York’s largest office
building owners) is near its lowest since the start of the
pandemic. Other large office building companies are seeing their
lowest stock prices since the early 2020 as well. Occupancy is
below 50 percent. Of course, this begs the question of what happens
when new office buildings come on line (construction that started
before the pandemic continued and new buildings will likely add to
the glut). Another concern is what happens when leases expire. Our
office lease in NoMad is up for renewal in a few years. Our firm
grew since 2020 and 2021, but will we need the same office space in
a few years? I don’t know, but this is certainly a question
being asked by other businesses in NYC.
Michael Einbinder is a founding Partner of Einbinder & Dunn.
He is a participating member of the American Bar Association Forum
on Franchising as well as the New York City Bar Association and has
been recognized by Who’s Who Legal: Franchise 2016 as being
“among the world’s leading Franchise lawyers.”
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