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Weekly Market Report - March 3, 2021

Goldman Sachs boss David Solomon has rejected remote working as a “new normal” and labelled it an “aberration” instead. Mr Solomon said the investment bank had operated throughout 2020 with “less than 10% of our people” in the office. His eagerness for workers to return to the office is at odds with many other firms, who have suggested that working from home could become permanent. “I do think for a business like ours, which is an innovative, collaborative apprenticeship culture, this is not ideal for us. And it’s not a new normal. It’s an aberration that we’re going to correct as soon as possible,” he told a conference on Wednesday. In particular Mr. Solomon was worried about an incoming “class” of about 3,000 new recruits, who wouldn’t get the “direct mentorship” they need. “I am very focused on the fact that I don’t want another class of young people arriving at Goldman Sachs in the summer remotely,” he said. ***

New York City is restarting $17 billion in construction projects, Mayor Bill de Blasio announced Monday. “We are going to get fully back to work with a host of major construction projects, capital projects that will build the future of the city, that will make life better for generations to come, and will employ a lot of people in the meantime,” de Blasio said. The projects include building and renovating city properties, among them schools, housing and parks. City-contracted construction has been mostly on hold since the pandemic restrictions were implemented. The restrictions put many contractors and their employees out of work. The construction restart will be supervised by Lorraine Grillo, who was tapped by the mayor on Feb. 22 to be the city's "recovery czar." In that role she will oversee all aspects of New York's economic comeback. ***

The pandemic is continuing to wreak havoc on Manhattan’s office market, with availability rates in the borough for February hitting yet another record high. The availability rate in the borough increased for the ninth month in a row to hit a record high of 15.5%, according to the latest monthly report from a brokerage firm. This is up from 14.9% in January and 9.9% in February 2020. Companies leased about 900,000 square feet of space last month, a 50.8% decline compared to January and a 42.8% drop from the average monthly volume last year of about 1.6 million square feet. Downtown Manhattan’s availability rate, at 15.6% reached its highest mark since 2013. Midtown and Midtown South both hit record-high availability rates of 16.2% and 14.6%, respectively. Average asking rent in the borough dropped for the eighth month in a row to hit $73.12 per square foot, a 0.7% decline from January and the lowest average since March 2018.


Equitable Life Insurance is moving its New York office by three blocks. The financial company will take 130,000 square feet at Fisher Brothers’ 1345 Avenue of the Americas. It will vacate its current location at 1290 Sixth Avenue, a 43-story office tower owned by Vornado Realty Trust and the Trump Organization, Commercial Observer reported. Equitable will move into its new office in 2023. The exact length of the new lease was not disclosed, although it was “long-term,” the outlet reported. Equitable’s move could affect the valuation of the 1290 Avenue of the Americas, which Vornado reportedly sought to sell or refinance, along with 555 California Street in San Francisco, which it also owns jointly with Trump.


How will office valuations be affected by the decline of the five-day commute? Shopping malls could provide some answers. Before the health crisis began, 5% or less of U.S. and European workforces worked from home. Rates are artificially high today due to stay-at-home orders: Over 50% of London workers are currently working remotely, according to the latest official count. Where this number eventually settles will be important for anyone that owns an office. Real estate consulting firm Green Street estimates that one day a week fewer in the office could reduce demand for space by 15%. A shift toward more flexible work patterns won’t hit landlords overnight. Big office moves take two to three years to plan in advance and many tenants are locked into their pre-Covid contracts for now. Big landlords are still collecting most of the rent they are owed. Still, many companies are preparing for change. At a property conference last week, global bank Standard Chartered became the latest to announce plans to redesign its central offices for client meetings and collaborative work. The days of “rows and rows of desks” are over, it said.


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