New York City is home to more than 8 million people and houses the country’s largest business district and the city’s glittering skyline of office towers and high-rises symbolizes its power and mystique as one of the world’s foremost business capitals. Yet New York has also been more severely impacted by Covid-19 than any other American city. Steven Kemler, Managing Partner of the Stone Arch Group and a New York native, explains why Covid’s impacts on New York City are far from over.
As of the time of this article’s writing in early July, New York City had more than 200,000 confirmed cases of Covid-19 and almost 18,000 associated deaths. The city’s lockdown, which was nearly total between mid-March and late June, is just beginning to loosen; New York entered Phase 2 (which permits major industries like finance and real estate to reopen offices) on June 22. But after months of nearly all white-collar employees working from home, how are companies responding to this reopening in practice?
Barclays, JP Morgan Chase, and Morgan Stanley are three of New York’s largest commercial tenants; collectively, they account for hundreds of thousands of employees across the city. Executives at each of these companies have indicated that work from home is likely to remain in place even when the city officially re-opens in full – and many companies around NYC are coming to similar conclusions. Just a few months ago, most corporate executives viewed working from home with suspicion. Yet these same executives have been surprised by the results of our ongoing experiment in mass telecommuting; rather than falling off, productivity appears to have actually improved in many cases. Managers’ anxiety around collapsing output has been replaced by anxiety around packing people back into offices. A recent survey found that companies with a significant presence in New York City expect only 10% of their employees to return to the office by mid-August.
The C-suite is now asking itself whether large office complexes are worth their cost. What value do offices really create for the workforce? Can this value be achieved through less expensive means, possibly even in a way that employees prefer over commuting to a central office every day? David Kenney, chief executive at Nielsen, said recently that his company plans to convert its New York offices into team meeting spaces where staff can gather a few times per week, and that most workers will continue to work primarily from home.
A realignment in New York’s office landscape will have substantial repercussions for the rest of the city’s economy, and for the city itself. Many businesses – restaurants, bars, shops – are reliant on the daily flow of white collar workers moving to and from their offices; others, such as hotels, depend on customers visiting the city for meetings, conferences, and other work-related occasions. If remote work becomes the norm, what will happen to these businesses… and to the tax revenue they provide to the city? New York’s public services could be severely threatened by an erosion on the office-related economy – a development that could exacerbate that very erosion, creating a vicious cycle.