Armano Real Estate June 2022 Newsletter
New York City Office Re-Occupancy – The Optimal Workweek
Managers for the past several months have called three days in the office a week a hybrid-work ideal that gives employees flexibility and packs in enough face time to cement company culture. For some, the three-day plan may be looking more like two, according to a leading researcher on remote work.
Nicholas Bloom, a Stanford University economist who studies remote work and advises companies on work setups, says about a dozen firms are paring down in-office schedules from three days a week to two. Other firms are abandoning a full return to the office altogether.
In a monthly survey of worker preferences that Mr. Bloom conducts with Steven J. Davis of the University of Chicago and José María Barrero of Instituto Tecnológico Autónomo de México, the gap between what workers prefer and what their companies are planning has begun to shrink, but a divide remains. Prof. Davis says that several executives he’s spoken with who tried to get employees to come back to the office four or five days a week failed. “There was a lot of complaining and a lot of quitting,” he says.
New survey data shows that full-time workers have more work-related stress and anxiety than their hybrid and remote counterparts. Moreover, overall satisfaction with their workplace declined by 1.6 times as much for those working five days in the office compared with the other groups, according to a report from Future Forum, a consortium funded by Slack Technologies Inc., Boston Consulting Group and Miller Knoll.
Some companies are testing out a 4-day workweek. Executives considered a shortened workweek to be the most-wanted recruitment and retention strategy according to Gartner Inc., but only 6% of those same senior leaders said they’re doing it or even planning to at their organization. Instead, companies are more likely to be increasing paid time off or giving workers more flexibility on when they start and end work each day.
The four-day debate provides a window into the disconnect between what employees are looking for in the workplace and what managers are willing to offer, exposing fault lines on topics such as the efficacy of remote work, employee benefits and salary increases at a time of rampant inflation.
We at Armano Real Estate currently see two days in the office a week emerging as the new normal. While the trend is clearly toward hybrid work and less days in the office, we believe that employers will gain leverage over employees as a result of a slowing economy and decreased demand for labor. Thus, we envision employees having more success in increasing the number of days employees are required to work in the office in the longer term.
Kastle Systems key card data shows average New York City building occupancy of 38.0% for the week ending 5/25. This figure is only slightly higher than the 37.0% peak pre-Omnicron high hit on December 1, 2021. So, there has been very little increase in office usage over the last 5-6 months.
According to Co-Star, market availability is currently 16.1% across all Manhattan markets and asset classes. This has remained steady for the past 12 months and is below the Post-Covid high of 16.5% reached at the end of the second quarter 2021. However, this remains well above the 11.7% rate prior to the onset of COVID-19.
Despite low building usage and relatively high availability rates, rents have bottomed and are slowly increasing. For example, 4 and 5 Star building rents (Class A and Class B type) were $72.01 for the second quarter ending 2022 across all Manhattan markets. These rents are currently estimated at $72.06, a slight increase over the prior quarter.
Armano Real Estate expects that NYC rents will continue to increase as a result of inflation. Landlord’s are experiencing higher building operating expenses and construction costs. We expect that they will successfully continue to pass these cost increases through to tenants in the form of higher rents as the return to work and the office slowly picks up.
Please feel free to contact us regarding your current real estate situation. We can provide a no-fee lease review and analysis and a preliminary space program to help meet your back to work plan and corporate real estate vision. Please see the below link for recent news announcements and our newsletters:
Armano Real Estate Returning to the Office:
Armano Real Estate Returning to the Office
Please see the below links for NYC recovery index:
NYC Economic Recovery Index
Please see the below links for NYC COVID results:
Positive COVID-19 Results by Region
Please see the following link regarding HealthCheck360 COVID-19 Workplace Solutions:
HealthCheck360 COVID-19 Workplace Solutions
