(The Center Square) – As companies continue in remote work mode and hold off leasing or buying New York work space, some economic analysts estimate it could be three to five years before the city regains its financial footing.
Demand has experienced something of a free fall. Lease signings through August of this year are down 50 percent compared to the same period in 2019, The New York Times reported. Many leases that are signed are for far shorter terms, and this year’s office market is on track to hit a 20-year low.
But the reality is only about 8 percent of the city’s workers had returned to offices as of last month, and many companies don’t expect to start transitioning back to office work until next summer.
The impact is putting the brakes on a host of potential deals.
While the meal delivery company Freshly was poised to sign a contract for space on Park Avenue this spring, the COVID-19 outbreak put those plans on hold.
Michael Wystrach, Freshly’s founder and chief executive, told the Times the company remains interested in new office space, but still is unsure when a lease will be signed.
The real estate brokerage firm Cushman & Wakefield estimates New York has more office space than London and San Francisco put together. At stake is New York’s reputation as a global corporate headquarters, as well as nearly 10 percent of the city’s annual tax revenue, which comes from office building property taxes.
Recovery is expected to be far slower going than the downturns experienced after 9/11 and the 2008 financial crisis.
But the pandemic’s seismic economic impact has caused many companies to consider overhauling what real estate they actually need to work in on a daily basis.
Despite deserted sidewalks, many elected officials maintain the city will bounce back as vitally as it has before. Less optimistic are investors with shares in major real estate holding companies.
Still, other signs point to a quicker turnaround. A month ago, Facebook rented all the available office space – 730,000 square feet – in the Farley Post Office building adjacent to Penn Station.
And another big tech company, Amazon, in March reportedly paid $1 billion for the former Lord & Taylor building on Fifth Avenue in Midtown, according to New York YIMBY.