About 78 percent of the 160 large employers surveyed said they had implemented hybrid remote and face-to-face arrangements, up from 6 percent before the pandemic. Most workers plan to come into the office only a few days a week, the group said.
The seismic shift in the use of office buildings has been one of the most challenging situations in decades for New York real estate, a fundamental industry for the city, and has upended the vast inventory of offices in Manhattan, home to the two largest business districts in the country, the Financial District and Midtown.
About 19 percent of Manhattan’s office space is vacant, the equivalent of 30 Empire State Buildings. That rate is up from about 12 percent before the pandemic, according to Newmark, a real estate company. Office buildings have been more stable in Brooklyn, where the vacancy rate is also about 19 percent but hasn’t fluctuated widely since before the pandemic, Newmark said.
Daniel Ismail, senior office analyst at Green Street, a commercial real estate market research firm, predicted that the Manhattan office market will deteriorate in the coming years as companies adjust their labor agreements and leases signed years ago expire. In general, companies that have retained offices have scaled down in size as they realize they don’t need as much space, while others have moved to newer or renovated buildings with better amenities in high-traffic areas, he said.
Even before the pandemic, it wasn’t uncommon for companies to move offices across the city or open separate locations outside of Manhattan. The city offers a tax incentive for companies moving to a suburb, with annual tax credits of up to $3,000 per employee.
Nearly 200 companies received it in 2018 for a total of $27 million in tax credits, the latest available data, according to the city’s Treasury Department. However, some office developers are betting that neighborhoods outside of Manhattan themselves will become attractive, attracting companies looking to avoid the hustle and bustle of Midtown.
More than 1.5 million square feet of office space is under construction in Brooklyn, including a 24-story commercial building in downtown Brooklyn.