Most companies in NYC aren’t leaving anytime soon, according to a new study by CoreNet Global. “More than 82% of the 67% tenant and landlord respondents are in the process of reopening parts of their global portfolios, while more than 95% are currently relying on social distancing measures, such as reorganized office plans, more extensive remote working and flex spaces.” While it is a good sign that companies are staying, it is still too early to see the real impact of COVID-19 had on New York. Companies also said they will be using new technology to help keep their offices safe while other say they will be giving their employees with PPE. In other parts of the world, companies are giving their employees more freedom in where they want to work. In Silicon Valley and the Bay Area, people are moving out of that area and into a more economical one. Three quarters of Facebook’s 40 percent of employees who are interested in permanent remote work, said they will most likely be moving to another city.
Despite the dark cloud over NYC’s office real estate, there have been some positive things happening. SL Green’s One Vanderbilt has raised its pre-opening tenancy from 65 percent to 70 percent; financial firm Oak Hill added to its original commitment and two small private-equity firms signed new leases. The grand opening of One Vanderbilt is supposed to be on September 14th or 15th, and by that time the new public plaza next to the building will be open. In the Seaport District, Pier 17 is reopened, and the new food hall located in Tin Building will open in 2021. Since the start of the Q3, AIG took 325k square feet at 271 Sixth Ave., and 220k square feet at 28 Liberty Street. IBM is on the lookout for space up to 100k square feet at various locations.
By the end of 2020, only a third of the city’s workforce will be back at work. Current occupancy levels are at 8 percent, 20 percent lower than expected. Companies are planning to bring back a little more than a quarter of their employees back by the end of the year and then by next summer, they hope to have more than half back in the office. The real estate sector has been on top of bringing their workers back; more than half are already back and 94 percent will be back by next summer. The tech industry has 74 percent employees expected back next summer with finance and insurance companies behind them.
Co-working companies are starting to close money-losing locations across the world. It is an effort to “slash costs at a time where the pandemic is reducing demand for office space, and perhaps for years to come.” It also shows how big these firms over expanded and became crippled with debt and expensive leases. In the first half of this year, these closures accounted for 1.5 percent of the space occupied by co-working spaces. People are saying the impact of these closings is modest as some were able to get rent relief and closing locations takes time. JLL is saying that about 4,500 co-working locations in the US (25 million square feet) will likely close or change operators. IWG PLC closed 32 locations and plans to close 100 more in the second half of this year. Knotel plans to close 20 percent of its portfolio as its revenue fell 20 percent in the second quarter. Efforts in closing locations has put tension between these firms and its respective landlords; property owners have sued Knotel, WeWork, and others over unpaid rent while IWG has used bankruptcy to exit lease obligations. IWG said “bankruptcy could allow the single-purpose entities to get out of long-term lease obligations in return for a one-time penalty.”
New York-based Steiner Studios has signed a deal to build a new film and television production facility in Brooklyn. This is the first expansion for the company beyond its 780,000 square foot Brooklyn Navy yard location where it has been since 2004. The new studio will be at Bus Terminal, a city-owned waterfront property in Sunset Park. The New York City Economic Development Corp. is redeveloping and rebranding the are as a dual media-production and garment-manufacturing campus called Made in New York. The lease is for 49 years with five 10-year extensions, and this deal represents $320 million in private investment. The city will undertake $15 million in infrastructure improvements and pre-development site work. Steiner Studio’s will have 525,000 square feet and will occupy the southern portion of the campus. It will build half of the facility from scratch, renovate the remaining buildings and build a 500-space parking structure. Construction on the second half of the campus has started but paused because of the pandemic. Officials hope to have it done by 2021.
As membership falls in WeWork, SoftBank is putting in another $1.1 billion into the company. WeWork told its employee this was just “another sign of SoftBank’s continued support for our business.” The funding will bring WeWork’s cash on hand to $4.1 billion. Membership fell 12 percent from the first quarter to 612,000, and in second quarter revenue, the company earned $882 million down from $1.1 billion during the first three months of the year. WeWork also burned through $671 million in cash, including $116 million due to layoffs for severance pay. In New York, WeWork’s availability rate is more than 20 percent, and it shuttered its first location ever at 154 Grand Street.