About 78% of the top 160 employers surveyed said they had adopted hybrid remote and in-person arrangements, up from 6% before the pandemic. Most workers plan to come into the office a few days a week, the group said.
The seismic shift in office building use has been one of the most challenging situations in decades for New York real estate, a fundamental industry for the city, and has upended Manhattan’s vast office stock, home to the country’s two largest business districts, the Financial District and Midtown.
About 19% of Manhattan’s offices are vacant, the equivalent of 30 Empire State Buildings. That rate is up from around 12% before the pandemic, according to Newmark, a real estate company. Office properties have been more stable in Brooklyn, where the vacancy rate is also around 19% but hasn’t fluctuated much since before the pandemic, Newmark said.
Daniel Ismail, the principal office analyst for Green Street, a commercial real estate research firm, predicted that the Manhattan office market will deteriorate in the coming years as companies adjust their working arrangements and leases signed years ago were starting to expire. Typically, companies that kept offices downsized, realizing they didn’t need as much space, while others moved to newer or renovated buildings with better amenities in transit-rich areas, he said.
Even before the pandemic, it was not uncommon for companies to move offices across the city or open separate locations outside of Manhattan. The city offers a tax incentive for businesses moving to an outer borough, with up to $3,000 in annual business income tax credits per employee.
Nearly 200 companies benefited in 2018, for a total of $27 million in tax credits, the latest data available, according to the city’s finance ministry. But some office developers are betting that neighborhoods outside of Manhattan will become attractive in their own right, attracting businesses that specifically want 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 retail building in downtown Brooklyn.
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