The COVID-19 pandemic has significantly impacted the occupancy rate of office buildings in Manhattan, with skyscrapers hovering around the 50% occupancy mark. White-collar workers now view the five-day in-person week as optional, leading property investors to consider alternative uses for their real estate. However, a half-occupied office building may still be worth more to New York than casinos or housing.
While the city has a record vacancy rate of 22.2%, twice the pre-COVID average, it is important to note that half-empty is not a failure. Getting workers into Manhattan two or three days a week is a significant accomplishment compared to no days a week. It benefits both employers and employees as it allows for teamwork and in-person meetings on the days they go into the office and greater concentration on solitary tasks on the days they work from home.
Having a core office hub in Manhattan is crucial for the city as office properties paid about $7 billion in annual taxes in fiscal year 2021, which is about 11% of total taxes. Furthermore, smaller employers are driven away when too much office space is converted into houses, casinos, or multi-story roller-skating rinks, making the city more vulnerable to mass-scale layoffs in a recession. Large banks and law firms are currently requiring workers to come in four or five days a week, so driving away smaller employers may not be in the city’s best interest.
Converting office buildings into housing is not as straightforward as it seems, as developers will need tax breaks to convert units, and there are already 60,000 empty rent-regulated apartments available in New York. Furthermore, converting an old office building to affordable housing may not create a large enough community to sustain schools and grocery stores. For now, doing nothing and hoping people come back to work more often is still the best course of action.
»COVID-19 pandemic significantly impacts occupancy rate of office buildings in Manhattan«
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