'It's A Waiting Game': Fall Approaches, But Workers Are Only Trickling Back To NYC Offices

As New York City has contained the coronavirus, landlords and city officials are imploring companies to return to their pricey Manhattan headquarters. But the vast majority of their workers, even with Labor Day in the rearview mirror, are still not ready to return.

The official start of fall is next week, but several major landlords are reporting building occupancy levels beneath 30%. Practicalities like the continued closure of the city’s schools and lingering fears over the virus appear to be keeping workers home.

“There’s still a lot of caution,” said RXR Realty Chief Operating Officer Frank Pusinelli, whose company's holdings include 75 Rockefeller Plaza, 230 Park Ave. and the Starrett-Lehigh Building.

He said RXR's portfolio has occupancy between 10% and 30%, which is an increase from the 5%-to-15% level before Labor Day. Like many real estate operators, RXR has already brought workers back. Those who have a medical or child care issue do not have to return, Pusinelli said, but 90% of RXR employees are now back at their desks every day.

Its tenants, however, are a different story.

“We are seeing an uptick, but I don’t want to paint a totally rosy picture," he said. "[Landlords] have done the work to keep people safe, people would expect us to lead, and so far, so good."

For the city that was once the epicenter of the pandemic, claiming the lives of 32,662 New York City residents as of Sept. 17, the next few weeks are somewhat of a test to its reopening plan. The infection rate was 0.8% in the city on Tuesday, after Monday broke a 38-day streak of the rate remaining below 1%. 

There has been a surge in pressure from the business sector in recent weeks to reopen more of New York City’s economy as the infection rate has remained low. Government officials, in some cases, have responded.

After a group of restaurants sued the state for $2B in damages for postponing indoor dining indefinitely and the industry's trade organizations lobbied intensively for the reopening of restaurant doors as the weather gets colder, Gov. Andrew Cuomo said last week that the city’s restaurants could seat customers at 25% capacity starting Sept. 30. 

The city’s 1.1 million-student public school district is set to reopen at full capacity the same week, a start date that has been delayed twice after the teachers unions claimed Mayor Bill de Blasio’s plan did not protect students and staff enough.

Roughly 10% of city companies had come back to work in August, but a quarter of companies said they would be waiting until at least January to return, according to a survey from The Partnership for New York City.

Related CEO Jeff Blau, who controls millions of square feet of NYC offices, penned an op-ed in The Wall Street Journal last month and wrote “the entire essence of this city we all love is at stake,” if workers did not return.

Blau had previously said he was “guilt tripping” CEOs to return to the office, and other major office landlords have been calling heads of companies to tell them it is their duty to make their workers return. De Blasio, too, encouraged workers back into the office to bolster the city’s economy during a press conference Tuesday.

“It’s time to start moving, more and more,” he said. “For a lot of smaller and midlevel employers, of course, start to bring people back as soon as you feel ready. We want to make sure that this city comes back to life, unquestionably.”

It is not quite there yet. The Durst Organization, which owns and manages more than 13M SF of office space in Manhattan, has an occupancy level of approximately 10% this week, up from around 8% a week ago, a representative told Bisnow. 

A spokesperson for Brookfield, which owns 25 office properties in New York City across 26M SF, said it has seen a “meaningful uptick” in occupancy since Labor Day, though the firm said it doesn't have precise figures. SL Green — whose own employees are now 100% “work from office," its CEO said this week — declined to be part of this story. Vornado also declined to comment or provide data.

A representative for Empire State Realty Trust, which owns more than 10M SF in the Tri-State area, said the firm had rolled out protocols to promote safety and social distancing at its buildings, but didn't provide occupancy figures. RFR did not respond to a request for comment by press time.

A representative for Silverstein Properties, which owns 13M SF of office space in the city, said the firm now has 100% of its own employees back at work, but did not provide data on its tenants. 

Rudin Management now has an occupancy level of 15% in its office buildings, up from 10% over the summer.

“We are seeing good progress and we are seeing people come back in a thoughtful and safe way,” Rudin Vice President Nicholas Martin said. “By no means are we through the pandemic, and people need to make sure they are following the proper protocols ... It will be telling once schools reopen in regards to occupancy numbers."

Any anxious landlords may have been soothed by news that some major banks were directing their workers to return, and multiple sources said actions major employers take set the bar for the rest of the city. Goldman Sachs is  reportedly planning to bring its workers back on a “rotation," and JPMorgan Chase has informed some senior staff in sales and trading they and their teams need to come back to the office next week.

However, earlier this week, workers at JPMorgan were sent home after an employee tested positive for the coronavirus.

“We’ve been managing individual cases across the firm over the course of the last few months and following appropriate protocols when they occur,” a JPMorgan spokesman said in a statement, per The New York Times.

Meanwhile, Deutsche Bank yesterday told its U.S. employees they can stay home until next summer, with Americas chief of staff Matthias Krause reportedly saying that even though virus numbers have plummeted in the city, workers are still worried about “public transportation, cleanliness, security and other quality of life issues," according to an internal memo reported by The Wall Street Journal. 

“A lot of companies are thinking, you have to do what is right for your firm and your employees, but people have a third level of consciousness that is to help New York get back on track, to contribute to the economy,” Transwestern partner Lindsay Ornstein said. “It’s a really delicate balance.”

CBRE Senior Vice President Ramneek Rikhy, a tenant representative, said people want to get back to the office to be focused and collaborative again.

“There is a lot more life out there," she said. "The tours that I am doing, just going into Midtown has been amazing, seeing people in suits again.”

Coworking operators in the city, who make up a decent chunk of the overall office footprint, said they have not had a post-Labor Day bump and that they haven't heard of many throughout the sector.

"Bottom line, my opinion is, the next six months are going to be very slow and the next six to 18 months are going to be difficult,” said Lisa Skye Hain, the co-founder and CEO of Primary, a coworking company with locations in downtown and Midtown Manhattan. “We are looking at Q2 of next year for some stability in reoccupancy.”

Skye Hain, who tracks occupancy via a sign-in sheet at Primary's locations, said that return numbers at Primary’s Downtown location, at 26 Broadway, have remained below 10% of a typical pre-pandemic workday.

On a high-occupancy day, around 35 will be in the space, she said, and while there has been more consistency since Labor Day, it is not much of an uptick from what she has seen since she reopened in June. One of the largest coworking operators in the city, Industrious, said its offices were around 50% capacity post-Labor Day weekend. Convene said it saw a 20% increase in the number of members back at 530 Fifth Ave., its flagship location. 

Neil Carlson, co-founder of coworking company Brooklyn Creative League in Gowanus, said that there has not been a significant uptick in returns in his space in the last two weeks.

“This time of the year is usually most active for us, but no one wants to be the first penguin in the water,” he said. “It’s a waiting game.”

While Carlson declined to give his own occupancy numbers, he said that generally, what he has been hearing in the coworking sector is that there has been a drop-off in revenue and membership and that occupancy has not been high anywhere.

“People have been traumatized by what the city went through,” he said. “We have to follow the science, but the science is telling us we can open up … I hope people are willing to dip a toe back in the water because I think when they do, they’re going to remember all the reasons why they loved the office.”