Spotify's US headquarters fills 16 floors of the 4 World Trade Center, a towering office building in Lower Manhattan that was first erected on the site of the 2001 terrorist attacks. Offices will likely never be full again: Spotify has told employees they can work anywhere, including in another state.
A few floors down, MediaMath, an advertising technology company, plans to give up its space. This decision is being driven by the new remote working regulations during the pandemic.
In midtown Manhattan, Salesforce, whose name adorns a 630-foot building overlooking Bryant Park, expects employees to be in the office only one to three days a week. A nearby law firm, Lowenstein Sandler, is considering extending its lease on the Avenue of the Americas office, where 140 lawyers worked five days a week.
"I have found only a few people, including myself, who believe we will be the way we used to be," said Joseph J. Palermo, the company's chief operating officer.
A year after the coronavirus sparked an extraordinary exodus of workers from office buildings, what appeared to be a short-term inconvenience is now clearly becoming a permanent and tectonic shift in the way and where people work. Both employers and employees have recognized the benefits of remote working, including lower office costs and greater flexibility for workers, especially family members.
Beyond New York, some of the country's largest cities have yet to see significant worker returns, even with less stringent government bans, and some companies have announced that not all workers will be returning in time.
In the past few weeks, large companies, including Ford in Michigan and Target in Minnesota, have said they are giving up significant office space due to changing workplace practices, while Salesforce, headquartered in the tallest building in San Francisco, is giving up a tiny fraction of it the employee will be in the office full-time.
But no city in the United States and perhaps the world has to reckon with this transformation more than New York and especially Manhattan, an island whose economy has been supported by more than 1.6 from corner hot dog sellers to Broadway theaters became millions of commuters every day.
Commercial landlords in Manhattan have entered 2020 with optimism. They have seen steady demand for office space, record prices in some parts of the city, and the largest construction boom since the 1980s. But that collapsed overnight. Property owners were suddenly on the hunt for unpaid rent, negotiating repayment plans with tenants, and offering deep discounts to fill empty spaces.
Mayor Bill de Blasio is demanding that the city administration's 80,000 or so employees return in early May, also as a signal to other employers that filling New York's buildings is a key to restoring them.
"This is an important step for the city and another important step on the road to New York City's full recovery," said de Blasio.
Still, around 90 percent of Manhattan office workers work remotely, a rate that has remained unchanged for months. This comes from a recent from the Partnership for New York City, an influential group of companies, among valued employers estimated to be less than half the number of employees, unchanged office workers would be returning by September.
Midtown and Lower Manhattan, the country's two largest central business districts, have never let more office space – 16.4 percent – much higher than in previous crises, even after the September 11, 2001 terrorist attacks and the 2001 Great Recession in 2008 .
As more companies postpone office return dates and make at least some remote working a permanent policy, the ramifications for New York could be far-reaching, not just for the city's restaurants, cafes, and other small businesses, but also for local government finances that depend heavily on commercial real estate.
Sarah Patellos, who is on the Spotify music team, worked at a dining table in Truckee, California, a mountain town near Lake Tahoe, where she spent most of the past year after going there for a weekend trip in March 2020 had flown because of government-imposed bans to get stuck.
"I love being in town, but you think about your life, the life experiences you want or the different chapters you might want, it's completely different now," said Ms. Patellos, who lived in Brooklyn would have. "It's totally life changing."
The towering office buildings that line the avenues of Manhattan have long made New York a global powerhouse and the capital of many industries, from advertising to finance.
Now, even some of the largest and most enduring companies, including JPMorgan Chase & Co., which employs more than 20,000 office workers in the city, have told their employees that the five-day office workweek is a relic. The bank that refused to comment on this article is considering a rotation work model, meaning employees would switch between remote and office work.
"If I come back to the office 100 percent with 100 percent of the people, I don't think there will be a chance," Daniel Pinto, JPMorgan's co-president and chief operating officer, said in a February interview with CNBC. "As with anyone who works from home all the time, there is no chance of it."
Other large corporations, including accounting firm PricewaterhouseCoopers, marketing group Omnicom Group, and advertising giant WPP, have been looking for subtenants to take over significant portions of their Manhattan offices.
The loss of workers has caused the market value of commercial real estate, which includes office buildings, to fall nearly 16 percent during the pandemic, causing a sharp drop in tax revenues for key urban services from schools to plumbing Facilities are paid.
Real estate and commercial buildings account for almost half of the city's property tax revenues. For the first time in more than two decades, New York expects property tax revenue to fall by an estimated $ 2.5 billion in the next fiscal year.
Still, New York is expected to receive significant federal aid from the stimulus package of $ 1.9 trillion: $ 5.95 billion in direct aid and another $ 4 billion for schools, a city hall spokeswoman said.
While this meets immediate needs, the city still has an estimated budget deficit of $ 5 billion for the next year and similar deficits in subsequent years, and a changing work culture could hinder New York's recovery.
The amount of Manhattan office space in the market has risen to 101 million square feet in the past few months, about 37 percent more than a year ago and more than all of the combined office space in downtown Los Angeles, Atlanta, and Dallas. "This trend has shown little sign of slowing," said Victor Rodriguez, director of analytics for CoStar, a real estate company.
However, at least one industry is charging in the opposite direction. Led by some of the world's largest companies, the tech sector expanded its presence in New York during the pandemic. Facebook added 1 million square feet of office space in Manhattan, and Apple added two floors of a building in Midtown Manhattan.
And the surge in commercial real estate available has actually been a boon to some new businesses, who have been able to find space to rent that was lower than before the pandemic.
"I've seen the New York City obituary many times," said Brian S. Waterman, executive vice chairman of Newmark, a commercial real estate services company. "Office reboarding will begin in May, June, and July, and you'll have a much fuller occupancy by the time we get into September."
However, there are currently few workers at their desks.
Only 15 percent of employees have returned to offices in New York City and the surrounding suburbs, a slight increase from 10 percent last summer, according to Kastle Systems, a security company that analyzes employee IDs in more than 2,500 office buildings nationwide. Only San Francisco has a lower rate.
The labor shortage has hit some of the city's largest real estate companies. SL Green Realty and Vornado Realty Trust, two of the largest office space owners in New York, and Empire State Realty Trust, which owns the Empire State Building, lost a total of $ 6.5 billion in market value.
The sharp declines have led developers to campaign for an idea that seemed unthinkable before the pandemic: converting distressed office buildings in Manhattan into low-income apartments.
The record vacancy rate has been driven by companies in almost every industry, from media to fashion, discovering the benefits of remote working.
In addition to the cost savings of running a small or no office at all, modern technology and communications have enabled employees to stay connected, collaborate remotely, and be more productive without long distances. Parents also want more flexibility in looking after their children.
"We believe we are above the next change, the dispersed age where people can be more valuable in the way they work, which doesn't really matter where they spend their time," said Alexander Westerdahl, Vice President of Human Resources at Spotify , the Stockholm-based streaming music giant with 6,500 employees worldwide.
At this time, Spotify has no plans to reduce its footprint in New York. As of February, the company announced to its employees in the United States, 2,100 of whom had worked in the Manhattan office, that they could work from virtually anywhere.
"The change is mainly due to globalization and digitization, and our tools make a lot possible for people to work from anywhere," said Westerdahl.
Remote work is of course not without its significant disadvantages.
The blurry lines that already existed between work and personal life were all but erased during the pandemic. Without the time spent commuting in the morning and evening, people log on to work earlier in the day and stay connected late into the night.
And despite modern technology and video conferencing capabilities, companies are struggling to foster work culture and get employees, especially new hires, to feel welcome and part of a team.
Those concerns have weighed heavily on executives at Kelley Drye, a law firm founded in New York in 1836 that is moving from Park Avenue near Grand Central Terminal to 3 World Trade Center in Lower Manhattan.
"Zoom and teams are great," said Andrea L. Calvaruso, an attorney who chairs the firm's trademark and copyright group, but she added, "There's no substitute for sitting in a beautiful new space to collaborate and collaborate with." to work together without the distraction. " . ”
But Ms. Patellos, although unprepared after she was stuck in California – she had to buy a keyboard and monitor – soon found herself in touch with colleagues around the world, just as she had done in her New York office.
"I got into a rhythm," said Ms. Patellos, who is still deciding where to move to at some point. “I spent a few hours on the east coast, starting my days a little earlier and ending a little earlier. Before I knew it, it became the norm and routine. "