Workers Can not Return to the Office in Big Cities
David Solomon's email inbox began to overflow shortly after a gunman killed a Goldman Sachs Inc. employee on a New York City subway train in late May.
Employees expressed their sorrow and concern to the CEO of Goldman. According to those with knowledge of the situation, they also wondered whether going back to the bank's Manhattan office would be feasible.
Later on that day, Mr. Solomon called Mayor Eric Adams of New York City to voice his concerns and make a strong point to the mayor, who has been working hard to raise the percentage of employees returning to work. According to these people, Mr. Solomon informed him that employees were hesitant to return because the city's safety and standard of living were declining.
Exasperation is rising among business, city, and community leaders across the United States over the Covid-19 pandemic, which has been going on for more than two years. These leaders have watched as offices have been abandoned while life has resumed as usual at eateries, airlines, sporting events, and other public places. Even though many employers now use hybrid schedules, fewer than half of pre-academic office workers are regularly visiting commercial areas.
The biggest cities in America are where the issue is most noticeable. According to Kastle Systems, which tracks the number of workers who swipe into office buildings every day, office use nationwide reached a pandemic-era high of 44 percent in early June. However, cities like Philadelphia, Chicago, San Francisco, and New York have lagged behind.
Politicians and business leaders in these cities feel a sense of urgency as a result of the gap, where the stakes are especially high given that office workers are the backbone of regional economies and support small businesses.
According to a report the mayor published in the spring, 26,300 small businesses in New York City shut their doors permanently between April 2020 and March 2021. According to data provider CoStar Group Inc., the amount of office space that is currently available in New York has increased to about 125 million square feet from 90 million in the first quarter of 2020. According to commercial real estate services company CBRE Group Inc., retail rents in Manhattan have decreased for 18 straight quarters, beginning long before the pandemic.
Time spent in transit is one issue for workers in large cities. According to a Wall Street Journal analysis of the nation's 24 largest metropolitan areas in May, New York, Washington, D.C., San Francisco, and Chicago have some of the nation's longest commutes as well as some of the lowest return-to-office rates.
Urban workers' unease has been exacerbated by worries about safety and crime, including on public transportation. According to statistics from the New York Police Department, major crimes, which include murder, robbery, and assault, increased in New York City by about 7.5% between 2019 and 2021. In San Francisco, homicides increased from 41 to 56 in 2021, while assaults and robberies decreased. Additionally, between 2019 and 2021, violent crime in Los Angeles increased by a minuscule 4%.
These problems are on top of a widespread reluctance to visit the office outside of major cities. Workers are saying to employers, "I am still concerned about Covid. The cost of driving to work is too high at $5 per gallon of gas, according to Brian Kropp, vice president of human resources research at consulting company Gartner. "Or, why should I go into work when half the people I need are going to be at home on any given day?"
According to a global survey conducted in March by accounting and consulting firm PwC, nearly two out of every three employees whose jobs can be performed remotely prefer a mix of remote and in-person work. According to a November 2021 survey by payroll service provider ADP, 68% of employees in North America said they would think about looking for another job if their managers insisted they return to their place of employment full-time.
Yelp Inc. is one of the most recent businesses to leave the workplace. The Washington, D.C., office of the San Francisco-based review platform was among those to announce last month that it was closing. Less than 2% of the three offices were utilized on a weekly average basis.
Although financial firm Nearwater Capital in New York now requires employees to show up to the office five days a week, managing partner James Peterson noted that "people aren’t really asking for a work-from-home day as much as apprising us that they intend to work from home."
He claimed that the distinction between a vacation and working from home "has definitely blurred." "We’ve had a bit of, ‘We are going to Florida to see the in-laws for a week, so I’ll be working [remotely].’ "
Even though attrition has been at or close to record rates for months, many employers are still hesitant to take a firm stance out of fear of losing workers. Companies are now in competition with employers worldwide, not just those in their local markets, as a result of the increase in remote work.
Many of the biggest employers in New York have adopted hybrid work approaches. In March, American Express Co. introduced a program that gives employees the option of remote work or a mix of office and home work. While some employees attend work every day, the company estimates that about 40% of American workers prefer to work remotely constantly.
According to a spokeswoman, Paramount Global also adopted a hybrid strategy earlier this year, where employees spend about half of their time in the office.
Some positions at JP Morgan Chase & Co. necessitate five days a week attendance. According to the company, some employees have a hybrid schedule, and a small percentage work entirely from home.
Office utilization in New York has been gradually increasing; it reached 41.2 percent during the week of June 29 after reaching a pandemic high of 42.5 percent the week before. Still, the rate is much lower than what policymakers and business executives would like to see.
Following a string of failures due to Covid surges, many executives claim they felt they were making progress in their back-to-the-office efforts earlier this year. The recent subway shooting and other violent subway incidents in New York have slowed momentum.
On a 30-minute call arranged by the Partnership for New York City, a group of business executives who have been collaborating closely with the mayor to hasten his return to office, Mr. Solomon reiterated his concerns a few days after he had spoken with Mayor Adams. Participants in the call reported that more than 100 executives from prestigious companies took part in it.
A lot of business leaders in New York are advocating for stricter anti-crime laws. Other organizations have worked to maintain as much flexibility and keep workers at home as possible. When reopening offices, some businesses had to engage in negotiations with labor unions. According to unions, they want to uphold other contract clauses and safeguard worker safety.
When the advertising firm where Celestie Rodrigues works implemented a voluntary return-to-work policy in the summer of 2021, she at first looked forward to going to work a few times per week. The client manager, age 26, enjoyed the pace shift and getting out of her tiny Manhattan apartment.
This winter, while they were the only two people in the subway car, a man flashed her as she was making her way to work. "I cried in the office because I was so shocked and stunned by what happened," she admitted.
She gave up using the subway for a month, but she still prefers to walk or ride a bike when she can. She occasionally works in the office, but if she feels isolated, she will occasionally choose to do so at a cafe.
Some businesses are offering to pay for car services or offer new transportation allowances in order to allay worker worries about the safety of the subway and the high cost of gas. Professional services company Deloitte announced last year that it would reimburse employees up to $1,000 for parking, tolls, and other commuting expenses as it transitions to a hybrid workplace.
To entice employees back to the office, more than 25% of the employers surveyed by Gartner at the end of March said they offered free lunch or snacks. Five percent of respondents admitted to funding or compensating commuter expenses.
In the meantime, thousands of small businesses are struggling to survive with so many employees at home. Revenue has decreased by about 30% at Blue Park Kitchen, a lunch-only restaurant in Manhattan's Financial District. According to owner and chef Kelly Fitzpatrick, it has been expanding recently, largely as a result of catering requests from businesses that provide free lunch to their employees.
"New York is particularly tough because our fixed costs are so astronomical that until we get back to 85% to 90% of where we were pre-Covid, it’s impossible to make any money," she said.
Many companies are updating their office space to give employees more light, filtered air, and collaborative workspaces in an effort to entice workers back.
The Carlyle Group will relocate its New York City office to the brand-new One Vanderbilt tower, which is close to Manhattan's Grand Central Terminal, in late 2020. According to Bruce Larson, chief human resources officer of the private equity firm, the space has contributed to luring employees back. He gives some leeway and asks for three days of attendance each week. Sixty percent of Carlyle's approximately 480 New York-based employees are present on any day other than Friday.
Mr. Larson, who was present at the meeting with the mayor, said: "it’s easy to take for granted how much the quality of the space matters on people wanting to be in the office, and this is a good reminder."
After the summer, some businesses claim they will adopt a tougher stance regarding office return. According to founder and executive chairman Ryan Williams of the real estate startup Cadre, attendance at work is currently voluntary. However, after Labor Day, the company anticipates that employees will be present three days per week.
Around 80 of Cadre's employees are based in New York, and the company plans to relocate to a new workplace it created with a post-pandemic future in mind. The majority of cubicles and private offices in Cadre's previous spaces are no longer present. There will be more conference rooms available for teams to collaborate in the new location.
Cadre also created a map of each employee's residence so it could choose a location with the shortest commute times. The current office is nearby Grand Central; the previous one was in the city.According to Mr. Williams, "the commute for a lot of people pre-Covid could take up to three to four hours round trip."
Tuesday through Thursday, the average office occupancy for Silverstein Properties, which owns eight office buildings in New York City, is between 40 and 45 percent, according to chief executive Marty Burger.
According to him, attendance in some buildings has recently been close to 70%. A list of daily events, special offers, and programming offered in the company's buildings is available on an app designed for tenants. These might include massages, yoga sessions, musical performances, and price cuts at nearby eateries and shops.
According to Mr. Burger, "we did more office leasing in the first quarter of 2022 than we did in all of 2021."
The best hope for businesses right now may be that more employees experience Michael Bartolomeo's feelings. The independent video editor commutes to the Manhattan production company where he is wrapping up a project every weekday from his Brooklyn apartment, where he lives with his newborn daughter, 4-year-old son, and working-from-home wife.
He claimed that working in an office setting relieves him of the isolation that comes with spending all day staring at a screen while wearing headphones. When this job ends, he worries about what he will do.
“Maybe this has just made me realize I don’t really want to continue working in an industry where the vast majority of people are remote,” he said.