Midtown Manhattan with fewer office workers: imagining the unthinkable

People want to live in Manhattan more than they ever have. The problem is that there are not enough people who want to work there.

And for Midtown Manhattan, a neighborhood built on commuters five days a week, it’s such a big deal that after decades as the nation’s dominant office district, real estate developers and city planners are trying to figure out what else he can offer.

On the residential side, apartment rentals in Manhattan are booming and sales are reaching record levels. But the Midtown offices are attracting barely a third of their pre-pandemic workforce.

“There’s no doubt that Midtown is going to have to reinvent itself,” said Chris Jones, senior researcher at the Regional Plan Association, an urban planning group.

Tourism, improved public transport and more vibrant pedestrian streets would help Midtown attract the people it needs, Jones said. “The transition is going to be difficult. It will be difficult for small businesses and low-wage workers who don’t have the resources to adapt,” he said.

With offices struggling, city and state officials are discussing rezoning New York City to allow for more housing, including in Midtown. After 9/11, government grants helped draw people to lower Manhattan, where officials had moved to convert unused offices into apartments even before the terrorist attacks.

Planners, however, are skeptical that Midtown could or should turn to housing to save the neighborhood. Many downtown buildings have large footprints and cannot be converted into apartments as easily as narrower downtown buildings began in the 1990s.

The recently opened Pebble Bar at Rockefeller Center aims to be less reliant on office workers.


Photo:

Nicole Franzen/Pebble Bar

In some ways, Midtown already looks a little different. Pebble Bar opened a few weeks ago in Rockefeller Center and was designed to be more upscale and intimate than other Midtown happy hour spots, said Julian Brizzi, managing partner. The bar serves seafood, not buffalo wings, and aims to be a place where people come to linger rather than down a beer on the way to catch the train, he said.

“We always envisioned that it would be a hedge against any kind of volume fluctuations between working in the office or working remotely,” Mr. Brizzi said. “We always intended to run a business in Midtown that didn’t depend on people having to go there to get to work.”

Midtown’s survival is essential for Manhattan, which last year was home to nearly 11% of all office inventory in the United States, according to an October report by New York State Comptroller Thomas DiNapoli. In 2019, the office sector employed 1.6 million people, or one-third of all New York City jobs, and accounted for two-thirds of the city’s gross product.

Office availability in Manhattan, a measure of vacancy and space about to be vacated, hit a record 17.4% in February, according to real estate firm Colliers.

Offices in Manhattan are currently in less demand than they were after the 9/11 terrorist attacks, when some wondered if people would feel safe working in high-rises again.

Manhattan was home to one of the largest and busiest office districts in the world before the pandemic, with a daytime workforce larger than the entire population of Houston. An estimated 2.6 million people worked in the borough three years ago, 70% of whom commuted from other parts of the city or its suburbs, according to the Planning Department.

Turnstile Exits at Midtown Subway Stations on the First Tuesday in February

42 Street/Port Authority

bus terminal

47-50 Rockefeller Streets Ctr

42 Street/Port Authority

bus terminal

47-50 Rockefeller Streets Ctr

42 Street/Port Authority

bus terminal

47-50 Rockefeller Streets Ctr

42 Street/Port Authority

bus terminal

42 Street/Port Authority

bus terminal

Now, after two years of working remotely, Midtown’s bustling former office district feels more than a little empty. A look inside the office towers reveals floors of vacant cabins. Once-crowded commuter trains are arriving at Grand Central Terminal and New York Penn Station with ridership less than half of pre-pandemic levels. Restaurants, bars and shops that relied on heavy foot traffic closed.

In New York and other cities across the country, it’s becoming clear that even when people feel safe to go out to eat or shop, most don’t want to resume their daily commute.

New York Mayor Eric Adams and New York Governor Kathy Hochul pushed employers to bring their workers back, but to little effect. Keycard scans tracked by security firm Kastle Systems show Midtown offices barely cracked a third of their pre-pandemic workforce in the first two weeks of March, despite falling infection rates in Covid-19.

Even as more companies announce return-to-office dates, many are adopting a hybrid model that will allow employees to work remotely for part of the week.

Meanwhile, co-op and condo sales in Manhattan hit record highs last year, in part due to pent-up demand following limited activity in 2020. The median selling price of all apartments in the borough topped $1.1 million, the second-highest in the past decade after 2017, according to the Douglas Elliman Rental Report prepared by Miller Samuel.

After plummeting in 2020, Manhattan rental costs are rising as tenants compete for a limited number of available properties. The median net effective rental price climbed to $3,630 per month in February, up 7% from two years earlier, according to the Elliman report.

Median Net Effective Residential Rent Price in Manhattan

November 2020

Lowest price in a decade

November 2020

Lowest price in a decade

November 2020

Lowest price in a decade

November 2020

Lowest price in a decade

November 2020

Lowest price in a decade

James Patchett, the former director of the New York Economic Development Corporation and current chief executive of multifamily landlord A&E Real Estate, said people would still go to the office, just not as often, and they would need more incentives to come to their office.

More developers and landlords will increasingly view high-end restaurants as amenities for their buildings rather than just tenants, he said. An example is Le Pavillon, the Daniel Boulud restaurant on the second floor of SL Greenit’s

new One Vanderbilt office building, next to Grand Central.

Perspex partitions and floor decals may not be permanent, but the pandemic will bring lasting changes to offices. Experts from the architecture and real estate sectors share their return to work and what the offices of tomorrow will look like. Photo: Cesare Salerno for the Wall Street Journal

On many streets near Grand Central, however, empty storefronts and struggling businesses show the impact of two years of dramatically reduced foot traffic.

Retail vacancy around Grand Central has doubled during the pandemic, with about a fifth of storefronts now vacant, up from 10% in 2019, according to the Grand Central Partnership, a business improvement district that covers more of 900 retail spaces on 70 square blocks.

Phil’s Stationery, an office supply store on East 47th Street that has been in business since 1973, is seeing about 80% fewer customers than two years ago, owner Samuel Podemski said. Before the pandemic, people lined up to buy notebooks, pens or ink cartridges. Now the store can go an hour without a single customer.

The store was able to stay open thanks to Mr. Podemski’s savings and the landlord’s rent relief. “We rely on office workers,” he said.

New York City has suffered severe job losses during the pandemic, and employment is recovering more slowly than in other regions. Service Employees International Union Local 32BJ said employment among its members who work in Manhattan office buildings is still down 15% from before the pandemic. More than 1,000 commercial office cleaners are still laid off due to remote working, and 2,000 positions vacated by workers who retired during the pandemic have not been filled, the union said.

Midtown’s survival is essential to Manhattan and the city’s economic health.

Richard Florida, a professor at the University of Toronto’s Rotman School of Management and School of Cities, said Midtown is facing seismic changes similar to those experienced in urban industrial areas in the late 20th century when factories closed and moved.

“The central business district that we think of is the last breath of the old industrial age,” Mr. Florida said. “This idea that you have to pack and stack these office workers and they have to commute at 9 a.m. and leave at 5 a.m. and work on cube farms is just silly. It’s completely disconnected from the way people work.

SHARE YOUR THOUGHTS

Has the pandemic fundamentally changed Midtown Manhattan? If so, what might that look like in a decade? Join the conversation below.

Attracting tourists and other visitors, who spend more than residents or office workers, would boost Midtown business, said Carl Weisbrod, who helped lead the city’s redevelopment efforts in lower Manhattan and is now Senior Advisor to HR&A Consulting Firm. Rather than focusing on residential, Weisbrod said city officials should focus on improving public transit and making Midtown’s congested streets more pleasant for pedestrians through initiatives such as permanent outdoor meals.

“I don’t see bringing more residents into Midtown as a silver bullet,” Weisbrod said.

Write to Kate King at [email protected], Roque Ruiz at [email protected] and Konrad Putzier at [email protected]

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