As remote work becomes permanent, can Manhattan adapt?

PwC, a global consulting firm with its American headquarters here, has told 40,000 of its United States employees that they can work remotely forever. Quinn Emanuel Urquhart & Sullivan, a white-shoe law firm with about 300 lawyers in New York, is allowing its staff to live anywhere in the country.

Verizon, headquartered in New York, has started permitting hybrid employees to come to the office as many, or as few, days a week as they want.

The list of companies permanently changing the way they work keeps growing longer, making the five-day-a-week trek into Manhattan an increasingly fading corporate practice — with enormous consequences for New York, whose economy is especially dependent on filling its forests of office towers.

The shift has raised alarms for Mayor Eric Adams and Gov Kathy Hochul, who have stepped up their urgent messaging that the city’s roughly 1.3 million private-sector office workers need to return to their desks.

“You can’t stay home in your pajamas all day,” Adams has said. But Hochul and Adams may well be shouting into the wind, as society changes around them.

They have valid reasons for concern. With more companies settling into a permanent period of hybrid work, the average New York City office worker is predicted to reduce annual spending near the office by $6,730 from a pre-pandemic total of around $13,700, the largest drop of any major city, according to research from economists at Instituto Tecnológico Autónomo de México, Stanford University and the University of Chicago.

And even as other indicators — such as Broadway attendance and tourism — show early signs of a rebound, workers are far less eager to return to office buildings.

The decline in Manhattan office workers poses a profound threat to the city’s real estate-reliant tax base, money that helps fund schools, police and parks. Without regular commuters, the region’s public transit systems face service cuts that will disproportionately harm workers who must show up in person.

And it has also contributed to the shuttering of coffee shops, dry cleaners and other small businesses that served commuters. Vacant storefronts have increased across Manhattan, according to the city comptroller’s office, and in some parts of midtown, 1 in 3 retail spaces are empty.

But even as flexible work models take hold, policymakers have barely begun to grapple with what that portends for Manhattan. The state has yet to take any steps to relax zoning regulations that hamper the conversion of office buildings to residential housing, including low-income units. A new $100 million fund authorized last year to help developers convert empty hotels and commercial buildings into housing has not been used, stymied by regulatory hurdles.

The city’s leaders have also been slow to consider repurposing midtown office buildings, including for entertainment, startup incubators or education, said Brad Lander, New York City’s comptroller. Adams has so far proposed creating a joint city and state panel to study the future of work and its implications for the city.

Hochul and Adams have prioritized making the city’s subway safer, so that office workers feel more comfortable commuting.

“We are not going back to 100% midtown office occupancy,” Lander said. “The sooner that stakeholders come to grips with that reality, the sooner we can take smart action.”

In the meantime, private employers are making policies that stand to fundamentally alter New York’s business districts, the largest in the country.

TIAA, an insurance company headquartered here, is letting its New York City workers who have moved elsewhere report to work at the firm's offices around the country, provided they are vaccinated. Penguin Random House, a New York firm with roots that date back to the 1800s, has no plans to require that employees return to its midtown offices.

“We have said if you want to move, have at it,” said Paige McInerney, director of human resources at the publishing house, which employs roughly 2,500 people in the New York City area. “There’s not going to be some date where we’re going to be like, ‘OK, everybody back in the pool.’”

About 37% of New York employees went to the office in late March, according to data from Kastle Systems, an office security firm, a pandemic-era high, but still far below the 80% norm before the pandemic.

“It’s never really going to be a return like it was,” said Sam Hammock, who runs human resources for Verizon. “We’re treating people like the adults that they have proven to be over the last 24 months.”

Many New York companies are still requiring workers to return to the office, emphasizing the need for in-person interaction to mentor new hires and collaborate more easily. Certain industries, like real estate and investment banking, were calling employees back to the office as early as June 2020.

Still, JPMorgan Chase CEO Jamie Dimon said this month in his annual shareholder letter that about half of his roughly 271,000 employees would be in the office five days a week, a notable shift from one of the biggest holdouts for in-person work. JPMorgan is the city’s largest private-sector employer.

Dimon also criticised virtual work, saying that it slowed decision-making and hurt “spontaneous learning and creativity.”

But in the current war for talent, with job openings near record highs, many companies say flexible work policies are key to gaining an edge over competitors. Women are also far more likely to cite remote work as a job requirement, according to research from Indeed, a job-search website.

During the pandemic, Unqork, a software startup founded in New York in 2017, reduced its office space in Manhattan’s Flatiron neighborhood to 8,500 square feet, from nearly 50,000 square feet before the pandemic.

The change came as Unqork announced it would become a remote-first company, allowing employees to work from anywhere. The company almost tripled in size during the pandemic and has about 600 employees worldwide.

“It’s a more efficient way to find talent,” said CEO Gary Hoberman. “If they want to work in Antarctica, that’s fine,” noting that one employee did, in fact, spend a month of the pandemic near the South Pole.

Nina Anziska, 33, permanently relocated to Los Angeles seven months into the pandemic after her boss said she did not have to return to her office in Manhattan. Her employer, Skillshare, an online-education company, gave up its 11,000 square feet of office space in the Flatiron neighborhood at the end of 2020.

Although the company signed up for coworking spaces around the country, Anziska has barely used them, saying that a requirement to be in an office is “close to a deal breaker” for her.

Skillshare CEO Matt Cooper is reluctant to sign a lease on a long-term office space, worried that everyone would be pressured to use it. Whenever he sees a competitor announce a return-to-office date, he said he directs his recruiters to target engineers at those companies.

“If I have to look at you for you to get something done, you’re not the right hire,” he said.

Other companies, including PwC, are keeping their office spaces despite flexible work policies.

Late last year, after PwC announced the option for employees to go fully remote, 22% of workers chose to do so while 78% wanted to go into an office occasionally.

Still, Nicholas Bloom, an economist at Stanford University, found in his research that New York City’s office workers plan to cut in half the number of days they spend in the office, the most of any city except San Francisco.

That poses substantial risks to the city’s tax base, which is heavily reliant on full office buildings. Before the pandemic, office buildings in Manhattan supplied more than one-quarter of the city’s property tax revenue, according to the New York State Comptroller’s Office.

Despite a flurry of recent deals, 18.7% of Manhattan’s office space is available for lease, close to a record high, according to real estate brokerage Newmark.

Despite the prevalence of remote-work policies, they have not necessarily triggered an exodus out of New York, some employers said.

After announcing a work-from-anywhere policy in December, the number of lawyers at Quinn Emanuel reporting to its New York office remains largely unchanged at around 300. Some lawyers are instead keeping their apartments in the city and spending winters in a warmer location or a skiing destination, said Andrew Rossman, a New York managing partner at Quinn Emanuel.

“It’s almost shocking to me that I don’t have tons of people saying they’re going to live in a less expensive place than New York,” Rossman said.

During the pandemic, Quinn Emanuel also opened an office in Miami, where many of its portfolio manager and tech clients had moved.

In June 2020, Zillow Group, a real estate website, announced that employees could move anywhere in the country and never return to an office. The company now has more than 300 employees living in New York City, a 15% increase compared with two years earlier, according to a company spokesperson.

One of them is Joshua Clark, 28, an economist. Last year, Clark moved from Seattle, where Zillow is headquartered, to New York, so he could be closer to friends and family and indulge in the vibrant music and nightlife scene.

Clark was able to choose an apartment in Brooklyn’s Bedford-Stuyvesant neighbourhood that was far from the nearest subway because he no longer had to commute.

“My stress levels are way lower,” Clark said. “I’d have a hard time having to be in the office. It’s outdated.”

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