What’s going on:
Data from the Real Estate Board of New York (REBNY) shows that official visitation rates in Manhattan offices are stalling. By using randomized cellphone data, REBNY analyzed the foot traffic of 250 office buildings in Manhattan’s midtown, midtown South, and downtown. Despite an increase in people returning to offices in Manhattan during the first three months of 2023 compared to the same period last year, the overall return to office rates remain approximately 40% below pre-pandemic levels, according to Axios.
Why it matters:
Axios reports that property taxes on office buildings make up about 20% of the city’s overall property tax collections. A decrease in office visits impacts the way businesses continue to evaluate their commercial leases.
The lagging office market in New York City highlights the potential long-term economic impact of the pandemic on large urban centers. The slow return to office spaces may accelerate the adoption of flexible work arrangements.
How it’ll impact the future:
The stalling of office visitation rates in New York City serves as an important indicator of the evolving nature of the workforce — with potential long-term consequences for urban economies and the commercial real estate sector. While New York and San Francisco seem to be the extreme outliers of commercial real estate office use, the trend also seems to be appearing across the United States. A greater number of businesses may choose to invest more in technology and infrastructure to support remote work environments, leading to a greater emphasis on work-life balance and employee well-being.
The commercial real estate market could adapt to this shifting demand by offering more flexible leasing options or repurposing office spaces for other uses.