Por Michael S. Derby
April 13 (Reuters) – Ongoing tensions in New York City’s business and office real estate sector continue to create headwinds for the region’s economy as it nears a full recovery from the coronavirus pandemic, and It’s unclear if the sector will return to its previous strength, the New York Fed said on Thursday.
“While the residential rental market has recovered, the retail and office markets have remained slack, largely due to the shift towards remote working and online shopping,” the bank said in a post on its website. .
Commercial rents in Manhattan have fallen sharply since before the pandemic, and “this weakening trend may continue as more and more commercial tenants relinquish leases that were negotiated when demand for office and retail space was much stronger.” “.
Although workers are coming to the office more now, they are not in sufficient numbers to help lift all the companies that once welcomed these workers, the New York Federal Reserve said.
“It’s very clear that the absence of office workers continues to put pressure on the New York economy,” Jaison Abel, the bank’s Head of Urban and Regional Studies, told a news conference.
When workers don’t go to the office, that means they don’t go to shops and entertainment companies, which hurts employment in those parts of the service sector.”
The New York Fed noted that while areas surrounding the city have largely recovered on the employment front, the city is still running a shortfall of about 1% of workers relative to before the pandemic, which started in March 2020.
And it is not clear when this situation could change. “One of the challenges, or one of the things that makes it less clear, is that people are back in the office, but not five days a week,” says Jason Bram, Economics Research Advisor for Urban Studies and Regional Bank. But that doesn’t necessarily mean that companies that rent offices can simply reduce the space they rent.
Bram said it appears that at a number of companies employees are coming in at a large scale on a few days of the week, suggesting that when workers are in the office, the company needs all the space it has rented, with vacant rooms the rest. days.
“When the chips drop, office demand will likely not return to the same level it was before the pandemic, but it’s not clear that the drop will be that severe,” says Bram.
The New York Federal Reserve’s findings on the city’s economy come at a time when fears are mounting about the fate of the commercial real estate sector, which relies heavily on loans to function. The Fed has raised rates aggressively, which is increasing the cost of financing commercial real estate at a time when the need for it is also declining, which has hit rental levels.
Last month, a real estate executive who sits on the New York Federal Reserve Board of Directors warned of a looming crisis for the sector and called on the industry to create a program to give “leeway and flexibility to regulators to work with borrowers to develop responsible and constructive refinancing plans.
The challenges facing the commercial real estate sector are compounded by the problems now affecting smaller banks following the failure of Silicon Valley Bank last month. These companies may be less able to make loans in the current environment and more exposed to defaults by commercial real estate borrowers. (Reporting by Michael S. Derby. Editing in Spanish by Juana Casas)
