NYC to lose $50 billion due to empty office spaces

Simeon Davidov

New York City is projected to lose $50 billion in revenue due to the reduced presence of office workers, according to a study published by the National Bureau of Economic Research.

Conducted by researchers from New York University and Columbia University, the study concluded that it could take up to 10 years for the city’s real estate market to bounce back to its 2019 levels. This came as a shocking discovery to most, despite the downward trend in the U.S. economy.

The researchers developed a pricing model that predicts U.S. office real estate will lose 39% of its value. Even in mid-September, office building occupancy rates were still below 50%, compared to 95% in February 2020.

Most civilians working office jobs prefer to work from home because it allows for flexibility and comfort. It also wipes out the need to commute, which may be a tedious task for some.

Lease revenue tanked by almost 18% in the last two years. The number of new leases went from 253 million square feet per year before the epidemic to only 59 million square feet after the pandemic.

Older buildings have lower occupancy rates, compared to newer buildings with higher rents and more amenities for their tenants. Young individuals working at big corporate jobs do not mind paying such rents for the benefits and services that come with the area such as a door attendant, swimming pool, fitness center and lobby.

As residents living in a city with one of the world’s largest commercial real estate markets, New York City residents constantly look for new opportunities. This is why some people suggest building technologically advanced offices, which are more likely to be leased.

If current remote work patterns continue, New York City’s projected $110 billion in office space might lose up to half of its value during the following 10 years. With less people commuting to work, transportation revenue dropped severely from $9 million in 2019 to $5.7 million in 2021.

Although it is predicted to experience a slight increase by the end of 2022, transportation revenue will still be far off from its numbers in 2019, when remote work was scarce.

Remote work has provided relief for most New York citizens, according to The New York Times.

Many jobs had set expectations of early arrival and late departure for higher status employees, in terms of who will get a promotion and creating competition in the workplace that benefits the company. Women and people of color enjoyed working from home much more than in person, according to a study.

Big technology companies such as Alphabet Inc.’s Google and Meta Platforms Inc. were said to have experienced a negative impact from their office investments because companies leasing offices will only be interested in leasing high-quality offices. Real estate owners of older buildings will also take large hits.

Many people working for businesses may be unhappy because they are losing the ability to create competition in the workplace among employees with remote work. Employees are more likely to log in at their start time and log out at their end time without staying longer to work more.

Some corporations enforce in-person work only. Although some employees said they prefer to work in the office, not everyone agrees with each other.

However, the study does indicate that local governments could have a role to play in helping to finance the conversion of commercial buildings to homes.

“With more people being able to separate the location of work and home, the migration elasticity to local tax rates and amenities may be larger than in the past,” the researcher wrote in the study. “Future research should explore these implications and study the role for federal fiscal policy.”