Manhattan office occupancy shows signs of recovery

How empty or full are office buildings in Manhattan? Welcome to the Twilight Zone.

The “workers at their desks” situation is reminiscent of the famous episode of the classic TV show in which the time warp sends an airliner back to the age of the dinosaurs. The pilot flies back into the jet stream, hoping to return to 1961 New York, but they only make it to 1939.

We are still far from reaching pre-pandemic occupancy rates. But signs of recovery are encouraging.

According to the Partnership for New York, which is expected to announce the results of its latest survey this week, office occupancy in Manhattan has risen to between 53 and 55 percent on an average weekday.

According to the CEO and President of the Partnership, Katherine Wilde, if the assessment is confirmed, it will be significant symbolic as well as significant progress compared to the 49 percent announced in September.

Employers and landlords are forecasting 57 percent occupancy by the end of the year, according to the latest data, Wilde said.

Meanwhile, the Kastle Systems Back to Work Barometer’s notoriously low “NY Metro” (which includes suburbs and even part of Pennsylvania) flirts with half-filled at 49.5%, its highest estimate to date.

No one really knows the full amount because there are too many fake factors and missing links in trying to value a market of nearly half a billion square feet.

The gap between pre-pandemic and current office attendance may be somewhat smaller than any data suggests.

Why? The obsession with today’s occupancy starts with the fantasy that before March 2020, offices were 100 percent full (remember, we’re talking about the people at their jobs, not how much space is rented). But in the years before, many employees used WFH at least part-time, especially in technology, creative, and media.

The partnership bases its data on surveys of large tenants. Kastle only counts inputs in buildings where it provides security services.

Fellowship attendance estimates seem low compared to large homeowners’ claims that their buildings are over 60 percent occupied, and compared to our own observations.

The towers on Sixth Avenue in Midtown look nearly full due to our highly unscientific method of observing their windows from ours. Restaurants are noisy. The patrons line up again to get Eddie’s shoes shined in the lobby of Rockefeller Center.

The same cannot be said for the struggling Third Avenue, where a lack of office traffic has wiped out dozens of stores and even the once-thriving Hillstone Restaurant.

The 49.5 percent Kastle score might be too high for less-than-stellar buildings. His count of mostly A-minus and Class B buildings does not include many older, smaller B-minus buildings with even lower physical occupancy.

Time will tell if the spikes herald a turbulent recovery, a fleeting blip, or something in between. We’d bet on a high middle ground as employers crack down on WFH excesses and remote workers realize that when layoffs come, they’re the first to leave.