Little is certain as New York City cautiously moves from crisis to functionality, but one thing is: Few people are returning to their offices, for the time being at least, despite it now being allowed.
Some 15 weeks after the city shut down, its workplaces were permitted to welcome back occupants starting Monday. Under Gov. Andrew Cuomo’s staggered reopening plan, the city entered into Phase 2 June 22, allowing commercial office properties to operate at 50% capacity, outdoor dining to commence, barbershops to reopen and real estate agents to tour properties. There were fewer than 1,000 hospitalizations from the virus Thursday, the lowest number since March 18, per state figures.
But businesses remain cautious with back-to-work plans, and occupancy at many office buildings this week has been even lower than some predicted, industry experts told Bisnow. Sources pointed to the summer lag as a contributing factor. Most acknowledged anxiety around the subway as a serious obstacle, and some said exploding infection rates in states that opened sooner has slowed the return.
”When we see high spikes outside of New York, there may be a fear factor here for going back to work, and it’s not a surprise,” said CBRE Senior Managing Director of Investor Services Thomas Lloyd, whose company handles property management for 80 office buildings in Manhattan and 20 across Westchester and Long Island. The company has been tracking occupancy levels each day since Monday. In the Downtown portfolio, which covers buildings south of 42nd Street, occupancy over the last two days was at around 6%. In properties north of 42nd Street, occupancy has been hovering around 9%, Lloyd said, and out of a total of 41 multi-tenanted buildings, six are still totally empty. In buildings in the suburbs, which entered Phase 2 ahead of the city, occupancy is at around 30%, Lloyd said.
“They are lower than expected, given the circumstances that the state of New York allowed 50% [capacity] and our surveys of tenants. We were expecting a 15% return to work in the first few days,” he said. “Clearly, the national viewpoint of this virus has changed outside New York, and that may give New Yorkers pause.”
In Texas, for example, the number of people hospitalized across the state has doubled since the start of June and hit an all-time high this week. Gov. Greg Abbott paused the state’s reopening, he announced Thursday. It is one of 29 states that have seen a rise in infections, and the nation hit a record high in cases Wednesday, and broke it on Thursday.
California and Florida, frequent sources of travel to and from New York, hit records for the highest number of cases in one day. So far, more than 120,000 Americans have died from the virus.
Most New York City office landlords were already expecting a slow return with their tenants, with some of the major occupiers of space saying they will not return until Labor Day or later. For many, the subway remains a crucial challenge. The system has seen ridership plunge as a result of the crisis.
“You have to look at it holistically. We are very confident that we can establish protocols that keep people who come to the building safe,” said Durst Organization Vice President of Public Affairs Jordan Barowitz. “We’re one link in a larger chain that includes people feeling confident on public transportation, having appropriate child care and not having underlying health conditions or living with people who are high risk.”
RXR Chief Operating Officer Frank Pusinell said the company’s office buildings, which include 75 Rockefeller Plaza, 230 Park Ave. and the Starrett-Lehigh Building, remain at between 5% and 15% occupancy.
“Any increase is going to come after July 4, and many tenants are still waiting for Labor Day for a very large uptick,” he said.
Pulsinelli himself is back at work, with RXR Realty bringing back employees on rotating teams.
“I feel great and much more productive,” he said. “One of the first big groups to come back are the real estate companies. We all want to put the money where our mouth is. We’ve done all this work to make the buildings safe.”
A spokesperson for Silverstein Properties, which owns 13M SF of office space, told Bisnow it has no figures yet on tenants’ return, but of the developer’s 406 employees, 25% are back in their offices this week. Related Cos. CEO Jeff Blau said earlier this month that he expected his staff to be back at the office “in full force” when Phase 2 begins. Brookfield Property Partners has predicted 25% of its 700 city employees will go back to their desks this week, The Wall Street Journal reports. RFR is planning for 60 employees to work from its Midtown office for four days a week, and Empire State Realty Trust CEO Anthony Malkin told the WSJ he expects about a third of his company’s employees to return within the week.
Flexible workspace provider Convene is not opening its three locations in the city until Monday, and It has taken the extra time to roll out new safety measures and protocols, Convene Chief People Officer Amy Pooser said. Convene’s locations in Los Angeles, Philadelphia and Chicago are up and running.
“If New York looks like other cities, we expect 15% to 25% members to come back in the first week,” she said.
Convene has worked to de-densify its workspaces, created a disinfecting schedule, installed new social distancing signage and put in hands-free temperature check machines.
“I think [Convene] members feel confident and safe in what we can offer them, at the same time some of them are not pushing employees to be back in the office yet,” Pooser said. “There is — like Convene internally and across the world — an increasing openness to flexible work.”
Phase 2 may be the testing ground for a whole new era of work, others pointed out. Drastic stay-at-home orders triggered a widespread work-from-home experiment, and people are now considering how much long-term impact it will have on the brick-and-mortar office market.
“We have a client in the Empire State building that has 350 people, they are talking about returning in Q4, regardless of what phase we are in. Others are talking about the beginning of next year,” Cresa Managing Principal Jim Pirot said. “It all reverts and revolves back to what commercial real estate looks like in the future … I doubt people are going to pay $100 a foot for lounge areas on Madison Avenue, so for a swath of the square footage, there will be consolidation and contraction.”
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