New York City’s fitful pandemic recovery has reached a critical inflection point.
After thrice appearing on the brink of victory over Covid, the city finally appears poised to put the plague behind it once and for all.
This time, the mood is more confident than in previous optimistic moments. As long as no terrible new Covid variant appears – an unlikely scenario in spite of ‘we can’t let our guard down’ fear-mongering – the Big Apple is ready to fully recapture its historic swagger.
It has already happened to a significant extent. Restaurants are full. Theatres have reopened. Times Square, given up for dead during its much-chronicled but short-lived ‘ghost town’ season, is nearly as crowded as in 2019.
The elephant in the room remains the inching slow pace of office reoccupancy
The residential market for sales and rentals rebounded robustly from the 2020 flight to the suburbs and to Florida. The apartment ‘glut’ of 18 months ago gave way to a drum-tight market that is now regarded as the opposite crisis – too much demand chasing too few units. Rents are up 33% from a year ago in rental units, which comprise two thirds of all city dwellings.
Newly elected mayor Eric Adams has dropped nearly all mask and vaccine mandates. In stark contrast to his business-bashing predecessor Bill de Blasio, Adams, a Democrat, sounds more like a Republican as he cheerleads for private enterprise and admonishes New Yorkers to put Covid restrictions behind them.
Spirits are higher than they’ve been since the pandemic first struck. Street festivals and other public events are back. A 55,000 sq ft restaurant and food complex by French chef Jean-Georges Vongerichten is poised to open at the South Street Seaport.
There is still much ground to make up. Office buildings lost 7% of their value, according to the city’s budget office, although this is a far cry from end-of-the-world forecasts of 67%. Office availability remains high at 17% in Midtown and close to 22% downtown. That is no surprise given the pandemic’s staggering toll.
A more meaningful portent might be a flurry of recent large lease signings and expansions for, among others, fintech firm Hudson River Trading at the World Trade Center and Roku in Times Square. More new leases starting at $100/sq ft were signed in the past six months than in the same timeframe before the 2020 lockdowns.
The retail picture remains choppy at best. Vacant storefronts blight uptown Madison Avenue, parts of SoHo and the Wall Street area. Hotels continue to struggle, but the recent lifting of vaccination passports for international travellers is likely to help.
The elephant in the room remains the inching slow pace of office reoccupancy. While landlords say full rent is still being paid on 95% of space, a prolonged work-from-home phenomenon could eventually damage the economic viability of their towers. This in turn would shatter the city’s tax base, which relies heavily on real estate taxes.
The most recent findings from Kastle Systems Back-to-Work Barometer and other studies are that Manhattan’s commercial towers are barely 30% full. In comparison, southern cities such as Austin, Texas, have reached 40%.
There are many reasons for New York’s sparsely populated offices: recent upticks in crime, tenants hedging their bets to see how much less space they will need after the dust settles and a workforce that has become habituated to staying home after two years of the pandemic.
But anecdotal reports this week of subway cars once again full suggest that the tide is turning. For all the idle talk about hybrid work weeks – three days in the office, two at home – there is no foretelling what will happen next.
A reasonable expectation is that offices will soon be newly alive with employees’ chatter, even if not to the same extent as before. Then, and only then, will New York City truly be able to triumphantly proclaim that it is back for good.
Steve Cuozzo is real estate correspondent for the New York Post