Manhattan loses $12B in potential consumer spending to remote work

Vincent Perretti

The COVID-19 pandemic facilitated a transition from working in an office to working from home, but the persistence of remote work caused Manhattan to lose $12 billion in potential consumer spending, according to new analysis.

Experts from different universities founded the group WFH Research in response to the pandemic to study the implications it had on working arrangements. They used a monthly survey called the “Survey of Working Arrangements and Attitudes.”

The survey was given to workers between the ages of 20 and 64. Questions focused on days spent in the office and expectations of work before and after the pandemic.

Computations consist of finding the average across respondents for each monthly survey.

Office workers reportedly spend less than 30% of their time in the office, equating to workers spending less than $4,700 per year on commodities that they would typically spend throughout the workday, according to data published by WFH Research.

Additionally, a survey from the nonprofit organization Partnership for New York City showed that 52% of employees work in their Manhattan offices on a weekday, but only 9% worked in the office all five weekdays.

Being an expensive borough to live in, Manhattan relies heavily on the spending of its residents to ensure a constant stream of cash flow.

“Less spending by workers in the central areas means a lot less sales tax revenue,” Jose Maria Barrero, a finance professor at Instituto Tecnológico Autónomo de México and researcher of the WFH group, told Bloomberg News. “If you have fewer commuters, that means less revenue.” 

In addition to the decline in consumer spending, the onset of an emerging real estate crisis due to remote work is also attributed for the $12 billion loss.

By 2030, around 330 million square feet of U.S. office space will be vacant. Meanwhile vacancy rates will reach about 18%, which is 55% up from the current rate of 12%, according to a report from the real estate firm Cushman & Wakefield PLC.

Due to the city being a global financial hub, New York real estate is highly sought out. Yet, remote work combined with economic instability has caused it to decline.

A volatile economy has left the Office of the New York City Comptroller to communicate its concerns in the budget forecast for this year.

The office noted that an area of concern is the city’s commercial market — if the economy were to continue its downward trend, office vacancy rates would skyrocket, causing an immediate loss in property tax revenues.

While New York City has experienced the country’s largest consumer spending reduction, other large cities are seeing the same trend occur.

Consumer spending in cities such as Los Angeles, Miami and Washington, D.C., decreased, ranging from $3,328 to $4,200 per person, while also accompanied by a total reduction of time spent in the office ranging from 32.9% to 37% of the work week, according to a report from WFH Research.

New York City does have the highest reduction in consumer spending per person. But, the city also had employees spend more time working at the office compared to other cities because employers are demanding their employees return to the office.

“We’ve got this kind of interesting tug of war that’s happening right now between workers and the employers, because the employers want people in the office,” RedBalloon CEO Andrew Crapuchettes told Fox Business. “And workers, we learned through the pandemic that, hey, you can be productive for a little bit when you work at home.”

While employers and employees continue to debate on the modality of work, New York City Mayor Eric Adams has urged workers to return to the office by creating incentives.

The New York Times reported that Adams tried signing a deal with District Council 37, which is the city’s largest union of municipal workers. The deal would allow the employees to work on a more flexible schedule, receive a 3% yearly wage increase in the first four years and 3.25% in the fifth year plus additional bonuses.

“It is a real concern,” Adams said, according to the New York Post. “We’re going to have to get to the table with all of our business leaders, our economists — and really, we can’t stumble into post-COVID.”