Idealista News: Remote work is costing Manhattan about 12,000 million euros a year

Idealista News: Remote work is costing Manhattan about 12,000 million euros a year

March 9, 2023


Three years after the pandemic, companies and administrations around the world continue to try to attract employees back to the offices and revive local economies. New job data analyzed by Bloomberg News shows that, in several US cities, Fridays at the office are dead. Mondays are a game of chance. And going back to pre-pandemic work hours seems like a lost cause.


Nowhere is the financial cost of remote work more pronounced, when it comes to expenses, than in the world’s leading financial center: New York. Manhattan workers are spending around $12.4 billion less a year (11.76 billion euros) due to 30% fewer days in the office, according to a Bloomberg News analysis, using exclusive data from the Working From research group . Home (WFH) at Stanford University , led by economist Nicholas Bloom .


The figure was calculated by multiplying the annual loss in spending per worker, adjusted for inflation, of the nearly 2.7 million commuters and residents who worked in Manhattan in 2019, according to the US Census Bureau .


That means that the average per worker stops spending 4,661 dollars a year (4,420 euros) on meals, shopping and entertainment near their offices in New York. In San Francisco or Chicago, the data remains at 3,040 and 2,387 dollars/year, respectively, about 2,880 and 2,265 euros.


Losing that much money means fewer sales and losses for restaurants, retailers and other businesses that power New York’s economic engine. Empty offices represent a multibillion-dollar crisis for the largest office real estate market in the US. Top CEOs like Goldman Sachs Group’s David Solomon or JPMorgan’s Jamie Dimon are increasingly impatient with their workers, compounded by falling taxes. What is the value of a city when the workers no longer need to be there?


But it also means less government revenue. “If you pay less taxes in the city, it’s going to be hard to get enough revenue to run the subways and invest in the schools and keep the city safe and clean and all the things that really matter,” said Supervisor Brad Lander . independent from New York City .


The situation in New York is revealing for other financial centers in the world. Just 6% of Londoners who were previously able to work from home said their companies expect to be back in the office five days a week, according to a report from the Mayor’s Office. In Tokyo, about 14% of job openings posted last year were mostly remote jobs, up from 3% in 2019, according to job portal Indeed .


The expense changes destination


When commutes disappear, traffic and sales revenue fall, and the tax base for commercial property shrinks, according to Steven Davis, a senior fellow at the Hoover Institution.


However, spending in the US has increased since 2019, according to Mastercard SpendingPulse, which measures sales in stores and online in all forms of payment. Although the disparities between the days of the week are evident in New York. Overall US spending in October 2022 rose an average of 23% on Fridays, compared with 20% in the New York metropolitan area and just 11% in Manhattan.


“Less spending by workers in the commercial and financial areas means much less income from sales taxes,” said José María Barrero, a professor at the Autonomous Technological Institute of Mexico and a researcher at the WFH group . “If you have fewer travelers, that means less revenue.”


These changes are most visible in the Financial District and Midtown Manhattan, where coworking spaces are empty at the beginning and end of the week. Many restaurants and shops have closed, and foot traffic and subway ridership have plummeted. Bankers, lawyers and other executives who use limousines to get to their offices in New York City have also readjusted their commute schedules to focus on Tuesdays, Wednesdays and Thursdays, according to data from HQ Corporate Mobility, which works with Fortune 500 companies to book rental cars.


From June to December 2022, trips made on Mondays and Fridays were just 33% and 38% of pre-pandemic levels, respectively, according to data from the company, which has made around 400,000 trips in the last three years. On Thursdays, the figure increases to approximately 43%.


“On Fridays, I definitely want to be in the comfort of my own home,” says Nate Diaz, 24, who commutes to his offices at financial firm S&P Global on Tuesdays, when he knows his colleagues will be there. That day, he spends $20 on lunch with colleagues and a bit more at ‘Happy Hour’ on Stone Street. Diaz saves $100 a week working from home, though she sometimes grabs coffee in her Astoria, Queens, neighborhood. “He used the extra money for subscriptions and a massage chair for my ‘improved’ home office.”


“People have changed their lifestyles and their behaviors,” notes Michelle Meyer, chief North American economist at the Mastercard Economic Institute . “If you’re working from home that day, you’re not commuting to your office, or going to the restaurant next door.”


The growth of telecommuting has turned the neighborhoods where hybrid workers live into a new kind of business district. Foot traffic in New York’s four other boroughs is back more than 85% by the end of 2022 compared to pre-pandemic levels, according to data from Orbital Insight . Manhattan’s recovery rate lags at 78%.


It is more pronounced between the restaurants and bars. Transactions increased 48% in Brooklyn in the fourth quarter of 2022 compared to 2019, compared to just 18% in Manhattan, according to data from the company Square . The two districts were growing at the same rate before the pandemic.


Average store spend on Mondays in October rose 28% in the Bronx, 21% in Queens and 18% in Brooklyn, compared with just 2% in Manhattan in the same period in 2019, according to Mastercard data .


Growth in the boroughs on the fringes could be positive for New York, but a recently released plan by the City Council to revive the city focuses more on gradually returning to a Manhattan-centric economy. In fact, Mayor Eric Adams requires public employees to work five days a week in the office, but he has had less success lobbying business leaders for more stringent requirements back in office. “It’s time,” he said last year. “New York City can’t flee home.”


existing risks


Worker attendance at New York offices during the fourth quarter of 2022 rebounded to about 43% of pre-pandemic levels, according to data from Kastle Systems . On Tuesdays, however, the average jumps to 51% and falls to 23% on Fridays.


Office attendance has risen as companies issue statements calling for more in-person days, but they are not a panacea, and many company policies have left many pandemic-era habits out of business. For example, Blackstone asked investment professionals to come into the office five days a week, but weekday traffic at its headquarters at 345 Park Avenue is still half the level of 2019. At American Express, which does n’t has sent mandates back to the office, only 31% of the traffic from the pre-pandemic business day is back at its headquarters at 200 Vesey Street.


In Manhattan’s eight major office buildings, foot traffic is down about 52% on Fridays and 45% on Mondays compared to before the arrival of Covid-19, according to Bloomberg News analysis of Placer data . .ai.


The researchers highlight a 40% drop in the market value of the offices because these skyscrapers are partially empty, which they estimate a loss of 5,000 million dollars in tax revenue (4,740 million euros), which is equivalent to 5 % of the city’s annual budget. Future sales tax revenue in New York could also decline as half-empty office buildings lead to slower spending. Your income tax base could also be affected if employees continue to relocate elsewhere.


“That’s a big hole that will have to be plugged with new taxes, lower spending,” said Columbia University professor Stijn Van Nieuwerburgh , who referred to the situation at a recent event as a potential “fatal urban loop.”


The city is still weighing the impact on its transportation system, where weekday ridership has rebounded just 64% on average in January and the revenue shortfall is expected to exceed $2 billion a year through 2026. (1,897 million euros).


With pandemic relief running out, the City Council is planning service cuts on seven lines on Mondays and Fridays, including Line 1 connecting Manhattan to the Bronx, and the L and F trains, which run through Brooklyn, Queens and Manhattan.


The change will be felt most of all by working-class New Yorkers, who are back to work five or six days a week. “They can’t afford a $50 Uber and they can’t work remotely,” New York Transit Authority (MTA) executive director Janno Lieber said in November.


Adjusting to the ‘new three-day work week’


New York has a record of overcoming economic crises like the 9/11 terrorist attacks or the 2008 financial crisis, but business owners say they are struggling to adjust to the new three-day work week.


Sam’s Falafel owner, Emad Ahmed , claims the foot traffic near Wall Street is the worst in his 30 years of business. On a sunny weekday alone, sales recover to about 60% of what they were. Meanwhile, the rising cost of gasoline and ingredients have put pressure on his business. “Mondays and Fridays, forget it,” Ahmed, 57, parks his truck in Zuccotti Park and only makes 30% of pre-Covid income on those days. “I lose money when no one is here.”


Jordan Cohen, manager of Bryant Park Grill in Midtown Manhattan , claims he sees 40% fewer diners on Mondays and Fridays. To make up for the lost business, the restaurant has leaned on corporate events on weeknights and has recouped about 90% of pre-pandemic revenue. But even those events are affected by the hybrid workweek. “At parties where companies invite 300 attendees, only about half show up,” Cohen adds.


At Sweetgreen, a popular New York salad chain, he notes that the beginning and end of the week used to be the busiest days, but “Monday and Friday are definitely not the same,” says Sweetgreen’s co-founder and CEO Jonathan Neman .


Its Bryant Park headquarters was notorious for lines that stretched the length of the block on weekdays. If it takes 13 minutes to buy one on a Wednesday, that’s just four minutes on a Friday.


Sweetgreen is now renegotiating leases with landlords to structure rent as a percentage of sales , versus a fixed amount common with commercial rentals.


With offices emptiest on Mondays and Fridays, business travelers are cutting hotel stays by a day or two and traveling only in the middle of the week, adds Vijay Dandapani, president and CEO of the City of Hotels Association. NY.


Business travel has picked up the most in places like Austin, Texas, and Charlotte, North Carolina, where workers are indeed returning to offices, according to lodging data and analytics firm STR . In Austin, hotels rebounded to 92% of pre-pandemic occupancy on Mondays last year, while New York hotels rebounded to only about 83%, and San Francisco fell even further behind at 74%. .


The resistance to coming to the office at the end of the week runs so deep that when a large financial firm rented a bar from the Fitzpatrick Hotel Group in Midtown Manhattan on a Friday night, only a third of the 130 invited employees showed up, John said . Fitzpatrick, owner of the company’s two hotels in New York City.


To boost business, he is considering raffling off a free trip to Ireland for patrons of the Friday bar. Another marketing idea is to encourage tourists to extend their vacation in New York City by promoting the hotel as a haven for remote work on Fridays. “We have to think about something,” concludes Fitzpatrick.