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Steven Roth, chairman of Vornado Realty Trust, acknowledged being bothered by the slow pace of workers returning to the office even as he expressed optimism for the real estate sector and New York as a whole on a third-quarter earnings call Tuesday morning. “We are a little frustrated at how long the return-to-work process is taking,” Roth said, “but there is no doubt that work in office will win over work alone at the kitchen table.” People in the real estate industry have been regularly predicting a more widespread return-to-office moment for the city since the onset of the Covid-19 pandemic in March 2020. But occupancy rates for office buildings remain relatively low, and many companies postponed their return plans in the wake of the Delta variant’s emergence this year. Vornado’s office occupancy rate is at about 43%. The office market citywide hit a 30-year high vacancy rate of 18.3% during the spring, according to figures from the state comptroller’s office. The latest update in October was a vacancy rate of 18.6%, still slightly on the uptick.
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Big Tech’s explosive profits and growth are leading to a boom in real estate acquisitions and developments for companies including Facebook, Amazon, Apple, Netflix and Google’s parent company, Alphabet — collectively known in industry parlance as FAANG. The five tech titans own or lease terabytes of space across the country, according to the Motley Fool, thanks to their many offices, storefronts, and data and distribution centers. Leading the way is Alphabet, which Reconomy, a commercial real estate analysis firm with a database of 50 million properties around the country, says owns 343 properties valued at $10.6 billion. But Amazon, with its huge warehouses, is taking up the most space with its 24.2 million square feet across the US — a number that is quickly growing.
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As return-to-work plans gather more steam, a survey of building managers and commercial real estate advisors found firms are largely deferring to their employees to determine what shape office life will take. Office managers largely predicted a hybrid approach to in-office work, with 55% forecasting a balance of three to five days per week and 23% saying employees would split remote and office work 50-50. Only 21% said most of their employees would work remotely a majority of the time. Nearly half of organizations would also give employees access to wellness amenities and the flexibility to work from anywhere, the survey said. Most would award employees a one-time bonus and about one-third of companies would pay for employees to relocate.
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The City Council is zeroing in on how it can convert empty office space to address the city’s affordable housing shortage even as the office market shows signs of a slow recovery. Experts say there could be some challenges including whether there will be enough funding to cover costly conversions, what zoning restrictions would have to be lifted to allow for the changes, and whether it’s going to be a partnership with the private sector. “Its best chance for success would be having a public-private partnership and allowing more free conversion,” said James Power, a land-use attorney at Kramer Levin. If the city is targeting developments with entirely affordable housing, “it needs a substantial subsidy to be able to do that,” he added. The council members will discuss whether conversions would be feasible and effective in providing housing and what specific buildings could make for good conversions. Members of the real estate community, which largely supports the bill, will testify.