Big Cities Can’t Get Workers Back to the Office
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Big Cities Can’t Get Workers Back to the Office
Occupancy is especially low in cities like New York, where workers are the engine of local economies
Concerns about safety, including on public transportation, have contributed to a reluctance to go back to the office.
By Lauren Weber, Peter Grant and Liz Hoffman, The Wall Street Journal
July 7, 2022 2:50 pm ET
Soon after a gunman shot and killed a Goldman Sachs Inc. employee on a New York City subway train in late May, David Solomon’s email inbox started filling up.
Staffers shared their grief and alarm with the Goldman chief executive. They also had questions about the viability of returning to the bank’s Manhattan office, according to people familiar with the matter.
Later that day, Mr. Solomon called New York City Mayor Eric Adams to express his concerns and make an emphatic point to the mayor, who has been struggling to increase the share of workers returning to the office. Mr. Solomon told him that employees were reluctant to return because the safety and quality of life in the city were deteriorating, these people said.
More than two years into the Covid-19 pandemic, exasperation is growing among business, city and community leaders across the U.S. who have seen offices left behind while life returns to normal at restaurants, airlines, sporting events and other places where people gather. Even after many employers have adopted hybrid schedules, less than half the number of prepandemic office workers are returning to business districts consistently.
The problem is most pronounced in America’s biggest cities. Nationally, office use hit a pandemic-era high of 44% in early June, while cities like Philadelphia, Chicago, San Francisco and New York have lagged behind, according to Kastle Systems, which collects data on how many workers swipe into office buildings each day.
The divide has created a sense of urgency among politicians and business leaders in these cities, where the stakes are especially high because office workers are the engine of local economies and fuel small businesses.
From April 2020 to March 2021, 26,300 New York City small businesses closed permanently, according to a report the mayor released in the spring. Available office space in New York has grown to about 125 million square feet, up from 90 million in the first quarter of 2020, according to data firm CoStar Group Inc. Retail rents in Manhattan have declined for 18 consecutive quarters, starting well before the pandemic, according to commercial real estate services firm CBRE Group Inc.
One issue for workers in big cities is time spent in transit. New York, Washington, D.C., San Francisco and Chicago have some of the nation’s longest commute times—as well as some of the lowest return-to-office rates, according to a Wall Street Journal analysis of the country’s 24 largest metropolitan areas in May.
Concerns about crime and safety, including on public transportation, have contributed to urban employees’ unease. In New York City, major crimes, which include murder, robbery and assault, rose about 7.5% from 2019 to 2021, according to New York Police Department statistics. In San Francisco, there were 56 homicides in 2021 compared with 41 in 2019, while robberies and assaults both fell. And in Los Angeles, violent crime edged up about 4% between 2019 and 2021.
Those issues come on top of a reluctance to return to the office that extends beyond big cities. Companies are hearing from workers that “I’m still worried about Covid. Gas prices are $5 a gallon and it’s too expensive to go into work,” said Brian Kropp, vice president of human resources research at advisory firm Gartner. “Or, why should I go into work when half the people I need are going to be at home on any given day?”
Nearly two out of every three workers whose jobs can be done remotely prefer a mix of remote and in-person work, according to a global survey completed in March by accounting and consulting firm PwC. And 68% of workers in North America said they would consider looking for another job if their managers insist they return to their workplace full-time, according to a November 2021 survey by payroll provider ADP.
Office usage in New York City hit 41.2% the week of June 29.
One of the latest companies to retreat from the workplace is Yelp Inc. The San Francisco-based review platform said last month it is closing offices in New York, Chicago and Washington, D.C. The three offices combined had less than 2% weekly average utilization.
Although financial company Nearwater Capital in New York now requires workers to return to the office five days a week, “people aren’t really asking for a work-from-home day as much as apprising us that they intend to work from home,” said James Peterson, the firm’s managing partner.
The line between vacation and work from home “has definitely blurred,” he said. “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].’ ”
Many employers remain reluctant to take a hard line, fearing the loss of employees when attrition has been at or near record rates for months. With the rise in remote work, companies are now competing with employers around the world, not just those in their local markets.
Many of New York’s largest employers have adopted hybrid work strategies. American Express Co. in March launched a program that allows employees to choose remote work or a combination of office and working from home. Some workers are in the office every workday, but about 40% of the U.S. workforce has opted to be remote all of the time, according to the company.
Paramount Global earlier this year also adopted a hybrid strategy which has workers in the office about half of their time, according to a spokeswoman.
At JP Morgan Chase & Co., some jobs require workers to be in the office five days a week. Other employees have adopted a hybrid schedule while a small percentage are doing all of their work from home, according to the company.
A Midtown Manhattan subway station last month.
Rush hour at 34th St.
Office usage in New York has been inching up, hitting 41.2% the week of June 29, down from its pandemic high of 42.5% the previous week. The rate is still far lower than politicians and business leaders would like to see.
Many executives say they felt they were making progress in their back-to-the-office efforts earlier this year, following a string of setbacks from Covid surges. In New York, the recent subway shooting and other violent incidents on the subway have undercut momentum.
A few days after he placed a call to Mayor Adams, Mr. Solomon repeated his concerns on a 30-minute call organized by the Partnership for New York City, a coalition of business leaders that has been working closely with the mayor to speed the return-to-office. More than 100 executives at top firms participated in the call, according to participants.
Many New York executives are pushing for tougher measures on crime. Other groups have worked to keep employees at home and preserve as much flexibility as possible. Some companies have had to negotiate with labor unions when reopening offices. Unions say they want to protect worker safety and adhere to other contract provisions.
At first, Celestie Rodrigues enjoyed going to her office a couple of times a week starting in the summer of 2021, when the advertising agency where she works started a voluntary return-to-work policy. The 26-year-old client manager liked the change of pace and the break from her small Manhattan apartment.
On the commute to work this winter, a man flashed her when they were the only two people in the subway car. “I cried in the office because I was so shocked and stunned by what happened,” she said.
She stopped taking the subway for a month, and still walks or bikes to get around when she can. She occasionally goes into the office, but sometimes opts to work at a cafe instead when she feels shut in.
To deal with worker concerns about subway safety and the high price of gas, some companies are offering to pay for car services or provide new transportation allowances. Last year, professional services firm Deloitte said that as it changes to a hybrid workplace it would provide workers up to $1,000 in reimbursement for parking, tolls and other commuting costs.
More than 25% of the employers surveyed by Gartner at the end of March said they were providing free lunch or snacks to workers to lure them back to offices. Five percent said they were subsidizing or reimbursing commuting costs.
At Blue Park Kitchen’s downtown location, revenue is down about 30% from prepandemic levels.
Blue Park Kitchen owner and chef Kelly Fitzpatrick.
Thousands of small businesses, meanwhile, are struggling to survive with so many workers home. At Blue Park Kitchen, a lunch-focused restaurant in Manhattan’s Financial District, revenue is down about 30% from prepandemic levels. It has been growing recently, mostly thanks to catering orders from companies offering free lunch to their staff, said owner and chef Kelly Fitzpatrick.
“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.
In another effort to lure workers back, many businesses are upgrading their office space to give workers more light, filtered air and collaboration-focused workspaces.
In late 2020, Carlyle Group moved its New York City office to the new One Vanderbilt tower, next to Manhattan’s Grand Central Terminal. The space has been a factor in drawing employees back, said Bruce Larson, the private-equity firm’s chief human resources officer. He expects people back three days a week, with some flexibility. On any day other than Friday, 60% of Carlyle’s roughly 480 New York-based workers are in the office.
The plaza outside One Vanderbilt in Manhattan.
PHOTO: AMIR HAMJA FOR THE WALL STREET JOURNAL
Food carts at West 45th St.
“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,” said Mr. Larson, who attended the meeting with the mayor.
Some companies say they will take a tougher stand on office return after the summer. Workplace attendance is voluntary for now at Cadre, a real-estate startup, said founder and executive chairman Ryan Williams, but the company expects employees to be in the office three days a week after Labor Day.
With around 80 people based in New York, Cadre plans to move into a new office space that it designed with a postpandemic future in mind. Gone are the preponderance of cubicles and private offices of Cadre’s prior spaces. The new location will feature more conference rooms where teams can work together.
Cadre also mapped out its employees’ residences to choose a neighborhood that would minimize commute distances. The office is close to Grand Central; the old one was downtown. “The commute for a lot of people pre-Covid could take up to three to four hours round trip,” Mr. Williams said.
Cadre founder Ryan Williams.
Silverstein Properties, which owns eight office buildings in New York City, is seeing average office occupancy between 40% and 45% Tuesdays through Thursdays, said chief executive Marty Burger.
Recently, he said, some buildings have had attendance close to 70%. The firm created an app for tenants that lists daily events, promotions and programming available in its buildings. Those can include massages, meditation classes, concerts and discounts from local restaurants and retailers.
“We did more office leasing in the first quarter of 2022 than we did in all of 2021,” Mr. Burger said.
The best hope for companies for now might be that more workers feel like Michael Bartolomeo. The freelance video editor commutes each weekday from his Brooklyn apartment, which he shares with his newborn daughter, 4-year-old son and working-from-home wife, to the Manhattan production company where he is finishing up a project.
He said the office environment provides a respite from the isolation that comes with spending his days staring at a screen with headphones on. He worries what he’ll do when this job ends.
“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.