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    Why Co-Working Spaces Are Betting on the Suburbs

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    Start-ups are betting that the pandemic has spawned a new kind of worker who wants an office space closer to home, without the long commute.Paul Doran, a health care salesman, dreads the thought of commuting back to his office in Manhattan after 19 months of working from home in Jersey City, N.J.But Mr. Doran, 33, also wants a break from overhearing his fiancée’s calls and a better place to meet with clients than the local Starbucks. So he signed up for Daybase, a new company that is opening several co-working spaces, including in Hoboken, close to his apartment.“It would take a couple more zeros on the paycheck,” he said, “to get me back to commuting into Manhattan four or five days a week.”More than a year and a half ago, the coronavirus pandemic triggered an unprecedented disruption to the daily routines of office work, keeping millions of employees in their homes.Now, as the pandemic crawls into a second year, the future of work is still up in the air as many companies have embraced a hybrid model, allowing employees to split their workweek between the office and home, with little clarity about the timing of a mandatory return.In this uncertainty, a growing number of start-ups are betting that the pandemic has spawned a new kind of worker — one who will not be commuting into a central business district five days a week, but would still desire occasional office space closer to home for a distraction-free environment.In the New York City metropolitan area, home to the country’s largest office districts, co-working spaces are increasingly targeting the hundreds of thousands of office workers who live in the suburbs.Some developers who own Manhattan office buildings have scoffed at the idea that satellite workplaces will become a permanent alternative to working from home or from traditional offices, believing the hybrid model is a short-term trend.Still, the emergence of co-working spaces in residential neighborhoods underscores the uncertain prospects for New York’s office sector and its role as an economic engine that supports a vast ecosystem of restaurants, coffee shops and other businesses.The owner of Saks Fifth Avenue is partnering with WeWork to turn parts of department stores into co-working spaces. Codi, a start-up founded in Berkeley, Calif., offers private homes as flexible working spaces. Industrious, a co-working company, has an office space inside a mall in Short Hills, N.J.Daybase, created during the pandemic by a group of former WeWork executives, is opening its first co-working locations in the coming months in the New York City area — Hoboken and Westfield, N.J., as well as in Harrison, N.Y.The company is leasing vacant retail spaces, targeting densely populated neighborhoods where local residents had long prepandemic commutes and few other co-working options. Users can pay $50 for a monthly membership for access to lounge areas or, for instance, use a desk for about $10 an hour.At the heart of Daybase’s thesis is the idea that giving employees the flexibility to work from a suburban office space will ultimately attract a wider talent pool and make New York City more competitive with other cities. The ripple effects would boost the region’s economy, Daybase executives believe, part of an ongoing debate about whether New York City can fully recover only if workers return to Manhattan five days a week.“Certain real estate owners believe the only path to prosperity is to bring everybody back,” said Joel Steinhaus, a Daybase co-founder. “I don’t follow that approach. If we’re thinking about attracting talent to the region, this is more sustainable long-term.”Joel Steinhaus, co-founder of Daybase, is betting on a future in which suburban residents will spend part of their week working out of a co-working space closer to home.James Estrin/The New York TimesIn New York City, the real estate industry has been eager for workers to return to office towers. But many companies have discovered that they can operate with a smaller footprint as more jobs have become fully remote. Despite a recent uptick in demand for Manhattan office leases, the availability of office space there is still near a record high.A recent analysis by Fitch Ratings concluded that if companies were to adopt just a day and a half of remote work per week, office landlords’ profits would fall by 15 percent. At three days, income would be slashed by 30 percent.Jim Whelan, the president of the Real Estate Board of New York, a lobbying organization that represents major developers, said his staff has been required to work five days a week in the office since the summer. He believes buildings will fill up as cheaper commercial rents entice companies to lease in Manhattan again.He questioned why employees would use a co-working site on their work-from-home days and brushed off the possibility of employees working remotely part of the week after the pandemic, calling it “your alternate universe.”“Over time, we are going to work a five-day-a-week schedule,” Mr. Whelan said. “There are signs that the commercial market is picking up in the pace of leasing and in terms of how many tenants are out there looking for space.”In the New York region, about 32 percent of workers were in the office in mid-October, according to Kastle Systems, a security company that tracks employee card swipes in office buildings. The percentage has climbed steadily since Labor Day, but is still half of what employers had predicted in a June survey by Partnership for New York City, a business advocacy group.A bigger reckoning around office space may unfold in the coming years, as an estimated 30 percent of leases at large Manhattan buildings will expire by 2024, according to the New York State Comptroller’s Office. One major question, economists say, is whether larger companies will hold onto their office space to guarantee seats for all employees, no matter how many days a week they come in.New York City’s office buildings are worth an estimated $172 billion and provide about 20 percent of the city’s property tax revenues. As new leasing plummeted during the pandemic, the value of the buildings dropped by $28.6 billion, the first decline in at least 20 years, according to the New York State Comptroller’s Office, costing the city more than $850 million in property taxes.For many employees, the reluctance to return comes down to the commute.Workers in the New York region had the longest average one-way commute in the country at about 38 minutes, according to 2019 census data. About 23 percent of workers in the region commuted at least an hour each way.In June, Tom Hebner, a vice president at NeuraFlash, a consulting firm, relocated to a co-working space operated by Serendipity Labs in Ridgewood, N.J., where he lives. He said he was reminded of the benefits whenever he visits the company’s New York City office, a round trip that can take up to three hours.“I’m the only guy in the suburbs who can walk to work,” said Mr. Hebner, who works at the Ridgewood location every day with three other NeuraFlash employees.John Arenas, the chief executive of Serendipity Labs, said that when he founded the company a decade ago, his pitch for co-working spaces in the suburbs failed to take off because the corporate world strictly adhered to a five-day workweek in a central office.Since the pandemic hit, Mr. Arenas said, more than half of his revenue now comes from companies that pay for employees to work from a co-working location in the suburbs as a perk.Savills, a real estate firm, has found through surveys of its corporate clients that many employees relocated to the suburbs during the pandemic, prompting companies to seek out Manhattan office spaces near transit hubs, like Pennsylvania Station. But it has also led employees to demand more flexibility to work from home.Offering co-working spaces as a perk could risk creating a fractured work culture where employees feel disconnected from the main office and more willing to switch jobs, said Rebecca Humphrey, an executive vice president at Savills.“If you’re not a company that has a very strong sense of your culture, an approach like this can really fail,” Ms. Humphrey said.Co-working spaces in the suburbs are particularly appealing to parents who want more separation between home and work, Daybase said. In its surveys of prospective customers, the biggest complaints about working from home were the lack of space, unreliable internet and noise (leaf blower day, in particular).Daybase plans to expand nationally through franchising, seeking out spaces that are close to grocery stores, child care options and gyms, with the hopes that workers use the offices as part of a broader daily routine.Mr. Steinhaus, the Daybase co-founder, sees the company as a supplement, not a threat, to the traditional office building. In fact, Daybase itself started leasing office space this summer in a tower near Grand Central Terminal. The company organizes its meetings and happy hours around Wednesdays, the designated day when every employee comes into the office.“The office building is not going anywhere,” Mr. Steinhaus said. “We’re just going to use it differently.” More

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    Kaplan and Rosengren, Fed Presidents Under Fire for Trades, Will Step Down

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    Robert S. Kaplan will exit his role as head of the Federal Reserve Bank of Dallas next month. Eric S. Rosengren, the head of the Federal Reserve Bank of Boston, is also retiring earlier than planned.Eric S. RosengrenSteven Senne/Associated PressRobert S. KaplanAnn Saphir/ReutersTwo Federal Reserve officials embroiled in controversy for trading securities that could have benefited from the central bank’s 2020 intervention in financial markets announced on Monday that they would leave their positions.Robert S. Kaplan, who heads the Federal Reserve Bank of Dallas, will retire on Oct. 8, according to a statement released Monday afternoon. Mr. Kaplan’s statement acknowledged the controversy as the reason for his departure. Eric S. Rosengren, the president of the Boston Fed, will retire this Thursday, accelerating his planned retirement by nine months. Mr. Rosengren cited health reasons for his early departure.The resignations followed the Fed’s announcement this month that Chair Jerome H. Powell had ordered a review of the central bank’s ethics rules in light of the concern surrounding the trades. When asked about his confidence in Mr. Kaplan and Mr. Rosengren during a news conference last week, Mr. Powell expressed displeasure with what had happened.“No one on the F.O.M.C. is happy to be in this situation, to be having these questions raised,” Mr. Powell said, referring to the policy-setting Federal Open Market Committee. He added, “This is an important moment for the Fed and I’m determined that we will rise to the moment.”Mr. Kaplan noted in his statement that it was his decision to leave the Fed, and that “the recent focus on my financial disclosure risks becoming a distraction” to the central bank’s economic work.Mr. Kaplan drew scrutiny for buying and selling millions of dollars in individual stocks, among other investments, last year — trading first reported on by The Wall Street Journal on Sept. 7. He has maintained that his trades were consistent with Fed ethics rules.Mr. Rosengren announced on Monday morning that he was retiring earlier than planned to try to prevent a kidney condition from worsening, in the hopes of staving off dialysis. The Boston Fed president came under criticism because he held stakes in real estate investment trusts, which invest in and sometimes manage properties, and listed purchases and sales in those in 2020. He spent last year warning publicly about risks in the commercial real estate market, and was helping to set Fed policy on mortgage-backed security purchases, which can help the housing market by improving financing conditions.Both presidents had previously announced that they would convert their financial holdings into broad-based indexes and cash by Sept. 30.Mr. Powell offered statements of support for both of the retiring officials in the news releases announcing their exit.But the controversy has pushed him into a delicate position. His own term as Fed chair expires early next year, and the White House is actively considering whether to reappoint him. A scandal at his central bank is sure to draw questions from senators when he testifies this week, and could even hurt his reappointment chances.As chair, Mr. Powell has also focused on shoring up public support in the central bank and explaining its role. He holds frequent news conferences, aims to speak in simpler language, and championed a series of “Fed Listens” events where top central bank officials meet and hear from community members whom they might not otherwise interact with — from community college students to local food pantry staff.The 2020 trading disclosures, which are shaping up to be the most headline-grabbing scandal the central bank has faced in years, risk chipping away at the widespread trust he has been working to build.Responses to Mr. Kaplan and Mr. Rosengren’s trading disclosures have been swift, and scathing. The group Better Markets had been calling for the Fed to fire both presidents if they did not resign. Other progressive groups had called for at least one of them to be ousted, and ethics watchdogs have said that the rules that had enabled their trades needed to be revisited.After the resignation announcements on Monday, Wall Street promptly began to assess what the departures would mean for monetary policy. Both officials have tended to worry about financial stability, and for that reason were likely to favor removing monetary policy support sooner than some of their colleagues — a stance often referred to as being hawkish.“Their exit will take out two of the nine more hawkish Fed officials who saw a 2022 rate hike as of the September F.O.M.C. meeting last week and remove important voices on financial stability issues in particular,” Krishna Guha at Evercore ISI wrote in a note to clients shortly after the announcement.Mr. Rosengren has been president of the Boston Fed since 2007, and his retirement was previously planned for June. The Fed’s 12 regional members rotate in and out of voting seats, and Mr. Rosengren would have had a vote on monetary policy next year. Mr. Kaplan would have voted in 2023.Kenneth C. Montgomery, the Boston Fed’s first vice president, will serve as interim president at that bank. The Boston Fed’s board members — excluding bank representatives — will need to select a permanent pick for president, subject to approval from the Fed’s Board of Governors in Washington.A longtime Fed employee who worked in research and bank supervision before becoming president, Mr. Rosengren played a key role in the 2020 crisis response. His regional Fed ran both the money market mutual fund and Main Street lending backstop programs that the Fed rolled out last year.The Boston Fed noted in the release that Mr. Rosengren hoped that his health condition would improve, and that he would be able to “explore areas of professional interest” in the future.Mr. Kaplan has been at the head of the Dallas Fed since late 2015, before which he taught at Harvard University and had a long career at Goldman Sachs. Meredith Black, that bank’s first vice president who had planned to retire, will serve as interim president until a successor is named, the Dallas Fed said. More

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    Google to Spend $2.1 Billion on Manhattan Office Building

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    The technology giant has built a sprawling campus on the West Side of Manhattan and has 12,000 employees in the city.Google announced on Tuesday that it would spend $2.1 billion to buy a sprawling Manhattan office building on the Hudson River waterfront, paying one of the largest prices in recent years for an office building in the United States and providing a jolt of optimism to a real estate industry lashed by the pandemic.The transaction comes during a precarious period for New York City’s office market, the largest in the country, as the swift embrace of remote work and the shedding of office space have presented the most serious threat to the industry in decades.While Manhattan has a glut of office space available for lease, setting record vacancy levels during the pandemic, the four firms that make up so-called Big Tech — Amazon, Apple, Google and Facebook — have staked a bullish position on the future of New York.The companies have rapidly increased their operations and work force, one of the few bright spots for New York, which has been hit harder by the pandemic’s economic toll than any other major American city.Google was already leasing but not yet occupying the 1.3 million-square-foot property, a former freight terminal near the Holland Tunnel known as St. John’s Terminal that is being renovated and expanded. The company has 12,000 corporate employees in New York City — its largest satellite offices outside its California headquarters — and said on Tuesday that it planned to hire another 2,000 workers in the city in the coming years.“New York’s energy, creativity and world-class talent are what keep us rooted here and why we’re deepening our commitment with plans to purchase St. John’s Terminal,” said Ruth Porat, the chief financial officer at Google and its parent company, Alphabet. “We look forward to continuing to grow along with this remarkable, diverse city.”Collectively, the four tech giants employ more than 22,000 people in their Manhattan offices. But their workers are unlikely to work five days a week in the office again anytime soon. Many tech companies have said they will allow employees to work remotely in a hybrid arrangement even after the pandemic ends. Google recently postponed its return-to-office plans to early 2022 because of the highly contagious Delta variant.The speed with which the economy recovers in New York City, especially Manhattan, could hinge on office buildings. Before the pandemic, they drew a million workers every day, and those workers’ spending on everything from morning coffee to business lunches to after-work Broadway shows supported thousands of businesses. The absence of those commuters has led many stores and restaurants to close in Manhattan.Companies have embraced remote work during the pandemic in ways they never had before, deciding that employees would be able to continue to work from home for some or all of the week after the pandemic eventually ends and even hiring new employees who plan to stay away from the office indefinitely.As a result, large employers like Condé Nast and JPMorgan Chase have relinquished chunks of office space, contributing to nearly 19 percent of Manhattan offices being available for rent, according to Newmark, a real estate services firm, nearly double the average rate over the last decade.About 28 percent of office workers in the New York City region, which includes parts of New Jersey, Connecticut and Pennsylvania, had returned to the office as of last week, more than double the rate from a few months ago, according to Kastle Systems, a security company that tracks employee card swipes in office buildings. The nationwide average was 33.6 percent, Kastle said.Kate Lister, the president of Global Workplace Analytics, a consulting firm advising companies on their return-to-office policies, said that hybrid work would remain a permanent feature of work culture after the pandemic.Office space is not going to disappear, but, Ms. Lister added, “The total space will come down.”Still, elected officials in New York sought to cast Google’s announcement as a sign of the city’s rebound.“This announcement from Google is yet another proof point that New York’s economy is recovering and rebuilding,” Gov. Kathy Hochul, a Democrat, said in a statement. “We are creating jobs, investing in emerging industries, lifting up New Yorkers, and together, we are writing our comeback story.”Mayor Bill de Blasio called the deal “a historic investment in New York City.” The transaction was first reported by The Wall Street Journal.When the St. John’s building opens after construction is finished in mid-2023, Google will have more than 3.1 million square feet of office space in New York, making it one of the largest leaseholders in the city.Google’s New York presence began in 2000 with a single employee in sales who worked out of a Starbucks. The company sealed its commitment to the city in 2010 with the $1.8 billion purchase of a 15-story building in Chelsea.Over the past decade, Google has rapidly increased its work force in Manhattan, hiring young engineers from the region’s universities, attracting tech workers who do not want to live in Silicon Valley and expanding its marketing and sales departments. The company has added 5,000 employees in New York since late 2018.The terminal building that will be home to Google’s new office is in Hudson Square, a neighborhood on the West Side of Manhattan between TriBeCa, Greenwich Village and SoHo. Many creative, media and tech companies have offices there, including the website builder Squarespace and the eyewear company Warby Parker. Disney has also selected the neighborhood as the site of the new headquarters for its New York office.In addition to businesses, the area has a growing residential population, after a rezoning in 2013 led to a boom in the development of new high-rise and condo buildings.In recent years, Google’s main rivals, notably Amazon and Facebook, have also invested heavily in New York City, turning a swath of the West Side, from Midtown to Lower Manhattan, into a thriving tech corridor.Facebook has acquired more than 2.2 million square feet of office space in Manhattan, most of it signed just before or during the pandemic, and has 4,000 employees in the city. Amazon, whose corporate offices are largely clustered near its competitors on the West Side of Manhattan, also bought the former Lord & Taylor building on Fifth Avenue for $1.5 billion in March 2020.And while the tech industry has been among the most amenable to remote work, the companies are still gobbling up real estate, a potential sign of their hiring pace and of a reimagining of office space.Tom Wright, president of the Regional Plan Association, a research and advocacy group, said that even though tech employees may only come into the office a few times a week, they may want more space between desks or bigger conference rooms. In particular, he said, offices need to figure out how to accommodate hybrid meetings in which some participants are in person while others are videoconferencing in from home.“During the pandemic, people assumed an across-the-board reduction in activity and demand for office space when actually it’s a much more complex equation,” Mr. Wright said.The growing footprint of Google and other tech giants in New York reflects their increasing importance to the city’s economy. Economists expect the tech sector to be a primary engine for job growth after the pandemic.In the first eight months of the pandemic, there were more job openings in technology roles than in any other occupation in New York City, according to an analysis of job postings by the Center for an Urban Future, a nonprofit research group. During that period, demand for tech workers was more than double that for finance.The tech sector has become New York City’s most reliable source of new middle- and high-wage jobs, researchers said, with average wages in tech jobs 49 percent higher than the average private-sector wage.But the presence of tech giants in the city has also been a source of tension, most notably in 2019, when Amazon abandoned plans to build a new corporate campus with 25,000 employees in Queens after facing opposition from progressive activists, elected officials and union leaders.They were angered chiefly by billions of dollars in government tax breaks and incentives offered to Amazon as a lure.Less than a year later, Amazon signed a lease for office space in Midtown Manhattan near the Hudson Yards development, the start of a multiyear expansion in New York City.Julie Samuels, the executive director of Tech:NYC, an advocacy group for the tech industry, said that despite the collapse of the Amazon deal in 2019, tech companies are still drawn to New York City because of its concentration of diverse tech talent.“I have not heard of another company either pulling back on plans to be here or deciding not to come here because of Amazon,” Ms. Samuels said. “We were worried about that.” More

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    Retailers Rethink Pandemic-Battered Manhattan

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    Starbucks has closed more than 40 stores, while adding mobile-order pickup counters in others. Other chains like Sonic are taking advantage of vacancies to establish themselves in New York.In the heart of Manhattan’s garment district, a once-busy Starbucks on the corner of Eighth Avenue and 39th Street sits empty. Just down the block, a Dos Toros Taqueria that opened just three years ago is now closed. And Wok to Walk, which once served steaming containers of noodles mixed with chicken and vegetables to a bustling lunch crowd, is also shuttered.While the Delta variant of the coronavirus has again delayed plans by many companies to bring employees back to offices en masse, workers who have been trickling into Midtown are discovering that many of their favorite haunts for a quick cup of coffee and a muffin in the morning or sandwich or salad at lunchtime have disappeared. A number of those that are open are operating at reduced hours or with limited menus.With the pandemic keeping millions of New York City office employees home for the past year, restaurants, coffee shops, apparel retailers and others struggled to stay afloat.By the end of 2020, the number of chain stores in Manhattan — everything from drugstores to clothing retailers to restaurants — had fallen by more than 17 percent from 2019, according to the Center for an Urban Future, a nonprofit research and policy organization.Across Manhattan, the number of available ground-floor stores, normally the domain of busy restaurants and clothing stores, has soared. A quarter of the ground-floor storefronts in Lower Manhattan are available for rent, while about a third are available in Herald Square, according to a report by the real-estate firm Cushman & Wakefield.Starbucks has permanently closed 44 of its 235 locations in Manhattan. It is now adding pickup areas in many stores.Hilary Swift for The New York TimesStarbucks has permanently closed 44 outlets in Manhattan since March of last year. Pret a Manger has reopened only half of the 60 locations it had in New York City before the pandemic. Numerous delicatessens, independent restaurants and smaller local chains have gone dark.“Midtown clearly has been the hardest hit of any of the areas of Manhattan,” said Jeffrey Roseman, a veteran retail real-estate broker with Newmark. “If you think of other office-centric areas, whether all the way downtown or Flatiron or Hudson Yards, there is a lot of residential surrounding those areas that helped sustain those markets. Midtown, for the most part, is a one-trick pony.“It’s mostly offices and hotels, which also took a hit from the downturn in tourism.”The turmoil has reached farther downtown though. Last week, the luxury furniture retailer ABC Carpet & Home — whose flagship store was a fixture of the Union Square area — filed for bankruptcy protection, in part because of “a mass exodus of current and prospective customers leaving the city.”But in a city where one person’s downturn is someone else’s opportunity, some restaurant chains are taking advantage of the record-low retail rents to set up shop or expand their presence in New York City.In the second quarter, food and beverage companies signed 23 new leases in Manhattan, leading apparel retailers, which signed 10 new leases, according to the commercial real estate services firm CBRE.Shake Shack and Popeyes Louisiana Kitchen were among those signing new rental agreements this year. So was the burger chain Sonic, which signed a lease for its first New York City outpost, replacing a Pax Wholesome Foods location in Midtown. The Philippines-based chicken joint Jollibee, which enjoys a committed following, plans to open a massive flagship restaurant in Times Square.Sonic signed a lease for its first New York City outpost, replacing a Pax Wholesome Foods in Midtown.Hilary Swift for The New York TimesStill, with so much uncertainty about when employees may fully return to Midtown offices, some companies are proceeding carefully. The coffee shop Bluestone Lane had plans to expand aggressively into Manhattan before the pandemic and is still considering locations in Midtown. But it has now turned its focus to opening in more residential neighborhoods like Battery Park City, Hudson Yards and Tribeca.“We intentionally selected urban residential areas for our new cafes so we are not dependent on our locals returning to a physical office space, and are well-positioned for the future of hybrid work,” Nick Stone, the founder and chief executive of Bluestone Lane, said in an emailed statement.And some chain restaurants that already have reopened in Midtown are altering their strategies to address what they believe are the changing needs of customers in a post-Covid world.On a recent weekday, a handful of customers were nibbling on salads and sandwiches at the Bryant Park location of Le Pain Quotidien. The long, communal tables that once dominated the front of the restaurant are gone for now, while refrigerated cases for a selection of grab-and-go drinks, salads and sandwiches will be expanded next year as part of a remodeling. A new app to preorder and pick up food became available in May.While the new technologies work for some customers, others long for the past.A Europa Cafe in Times Square closed, one of numerous stores to shutter during the pandemic.Hilary Swift for The New York Times“We used QR codes for guests to look at the menu as we tried to limit the contact of surfaces, but the majority of our guests want to hold a real menu,” said Stephen Smittle, the senior vice president of operations for Le Pain Quotidien. “They very much want to feel normal. They want a server. They want to hold a cup of coffee, not a paper cup.”Struggling before the pandemic, Le Pain Quotidien filed for bankruptcy in May 2020. It was acquired by Aurify Brands, which has since reopened many of the Le Pain Quotidien locations around the city, including several in Midtown.“Our thinking is that Midtown New York will come back to a level that might not be 100 percent prepandemic, but based upon information we have gathered, I do believe that Midtown is going to come back to a prominent level,” Mr. Smittle said.An online-order status board at Starbucks.Hilary Swift for The New York TimesCustomers increasingly like ordering drinks online and then picking up at the store.Hilary Swift for The New York TimesFor Starbucks, one of the big lessons from the pandemic was that customers liked ordering their drinks online and then quickly picking them up at stores or drive-throughs. Starbucks had started to offer that even before the pandemic, opening a pickup location in Midtown’s Pennsylvania Plaza in late 2019.Since early 2020, Starbucks has permanently closed 44 of its 235 locations in Manhattan. But it is in the process of adding mobile pickup areas in many stores and adding more pickup-only locations. The company says that it expects to have net new store growth in Manhattan in the next few years.Before the pandemic, Starbucks operated three stores around the Columbus Circle area. It closed them and this year, opened one large restaurant. Now runners from Central Park pick up their preordered drinks from a mobile counter and head out again, while other customers stand in line to place their orders and can sit at nearby tables.“We were going to build the concept out and evolve over time,” said John Culver, the president of North America and chief operating officer for Starbucks. “What we’ve done is taken the opportunity that the pandemic has presented and accelerated the transformation of our portfolio of stores. Consumer behaviors during the pandemic have accelerated at levels that no one expected.” More

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    The Work-From-Home Economy and the Urban Job Outlook

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    Restaurant Associates is not the company it used to be. It has long operated restaurants, catered events and run corporate dining rooms for clients including Google and the Smithsonian Institution. Now it employs about half of the 10,000 or so people it had on staff before the pandemic.As its lines of business dried up, the company invented new ones. It has made soups and side dishes for the online grocer FreshDirect. It has delivered meals to displaced Wall Street traders working from Connecticut, and to guests attending “virtual galas” from home.Restaurant Associates is probably going to have to keep improvising. Just as things started looking up in the summer — with some museums reopening, businesses scheduling a return to the office, and catered galas bouncing back in full force — the Delta variant of the coronavirus brought everything, again, to a halt.“We were very hopeful that by September we would start coming back strong,” said Dick Cattani, the chief executive. Now, he said, “we don’t know what’s happening, what’s next.”This anxiety is widespread across the American economy. As Kevin Thorpe, chief economist of the commercial real estate services firm Cushman & Wakefield, noted, “The longer the virus lingers, the more transformative it is going to be.”A critical question is whether the urban service economy — the restaurants, hotels, taxi services and entertainment venues that employ millions of workers — can recover from the multiple waves of Covid-19 that have kept their customers away.After months of social distancing and remote work, this will depend to a large extent on how employers and workers readjust their attitude toward proximity and density — toward space.Three researchers — José María Barrero of Autonomous Technological Institute of Mexico, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago — estimate that from April to December 2020, half of the working hours in the American economy were supplied from home. After the pandemic ends, they think, the share will fall to around 20 percent. That is still four times the amount of work delivered remotely in 2017 and 2018.And remote work will be concentrated among the most highly paid workers in the most densely populated places. For instance, over half of the workers in high-skill, information-intensive services — in finance and insurance, information, professional services and management — were still working from home in January, according to researchers from Princeton, Georgetown, Columbia and the University of California, San Diego.Big cities face a dual threat of losing both their most skilled workers and the consumer service economies they sustain, the researchers wrote. “As a result,” the authors added, “they may shrink in size unless they manage to provide advantages that justify the costs of urban density when residential choices are set free from proximity-to-workplace considerations.”About 18 percent of office space in central business districts across the United States is vacant, compared with 12 percent before the pandemic, according to Cushman & Wakefield. Groupon, Twitter, United Airlines and other businesses are shedding office space. Some are rethinking their use of space entirely.Restaurant Associates, which has long operated restaurants, catered events and run corporate dining rooms, is working with about half of the 10,000 or so people it employed before the pandemic.Amy Lombard for The New York TimesAs its lines of business dried up, the company invented new ones.Amy Lombard for The New York TimesRestaurant Associates now delivers meals to guests attending “virtual galas” and Wall Street traders working from home.Amy Lombard for The New York TimesThe sports equipment retailer REI sold the corporate headquarters it was building in the Seattle area, meant to house some 1,800 employees, and is setting up three smaller satellite offices around the area, for workers to gravitate to if they wish. They can work entirely from home, too.“We felt there are moments when being physically together makes a difference but it doesn’t have to be all the time,” said Christine Putur, REI’s executive vice president for technology and operations. “We want to move forward with more habits, new norms — let the outcomes drive when and how we get together.”This reconfiguration of work is likely to reconfigure the American economy, changing wages and spending patterns.Google, for instance, is allowing employees to work remotely. But it will adjust compensation depending on the local cost of living. In a blog post to employees, Google’s chief executive, Sundar Pichai, estimated that some 20 percent of them would choose to work from home permanently. And the company developed a calculator for employees to figure out the effect on their pay.Mr. Davis of the University of Chicago and his co-authors estimate that the increase in working from home will reduce spending in city centers by 5 to 10 percent, hurting business at restaurants, bars and other spots that rely on the spending of office workers.“Some of the leisure and hospitality activities will follow those people that are no longer in the downtown area,” Mr. Davis said. But the spending of newly suburbanized workers may be different, including fewer lunches and happy hours than when they worked downtown.America’s economic geography looks different from what it did two years ago. New York City’s share of the nation’s employment fell to 2.8 percent in July 2021, from 3.1 percent in July 2019. That means about 375,000 fewer jobs than if the city had at least kept pace with the country as a whole. More

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    Growth Is Strong, but the Obstacles to Full Recovery Are Big

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    The new G.D.P. numbers paint a vivid picture of a nation still struggling to complete an economic readjustment.A house under construction in Culver City, Calif., last fall. Despite great demand for housing, the sector actually contracted last quarter because of supply constraints.Chris Delmas/Agence France-Presse — Getty ImagesMost of the time, a 6.5 percent rate of economic growth would warrant celebrations in the streets. Only in the weird economy of 2021 can it be a bit of a disappointment.It’s not simply that forecasters had expected a G.D.P. growth number that was a couple of percentage points higher, though they did. And it’s not even that America’s output remains below its prepandemic growth path in inflation-adjusted terms, though it is.What makes the new G.D.P. numbers on Thursday feel less than buoyant is the degree to which they reflect a nation still struggling to complete a huge economic readjustment.The report offers some sunny signs, certainly. Growth for the first half of the year easily outpaced the rates mainstream forecasters envisioned late last year, and strong growth in business equipment investment bodes well for the future.But it is an uneven economy — bursting at the seams in some sectors, while still depressed in others. The new numbers show an economy with plenty of demand, but where supply constraints in certain sectors are binding, reducing the overall pace of growth beneath what ought to be possible.Consider the housing sector. The industry is in some ways experiencing a boom, with home prices (and increasingly, rents) rising fast. Yet in terms of the G.D.P. accounting, residential investment became a big negative in the second quarter, contracting at a 9.8 percent annual rate.If builders can’t get lumber, drywall, appliances and the like at prices to “pencil out,” or to make economic sense, they can’t build houses. And so despite extraordinary demand for houses, the sector actually subtracted half a percentage point from the overall G.D.P. growth rate.There was a similar 7 percent rate of contraction in investment in business structures, which probably reflects a mix of supply constraints and uncertain future demand for certain classes of commercial real estate like offices and hotels.Then there are inventories of goods, which subtracted 1.1 percentage points from the second-quarter growth rate. Economists tend to ignore swings in inventories, as they tend not to reveal much about the future direction of the economy. In this case, though, the inventory decline is telling. It is consistent with what businesses are saying about having to draw down inventories as they struggle to keep up with demand (think, for example, of auto sales lots with far fewer cars and trucks to choose from than usual).Meanwhile, the great readjustment in the economy that needs to happen between consumption of goods versus services — although it continued in the second quarter — still has a long way to go.Consider a hypothetical world where the pandemic had never happened, and instead the economy kept growing as forecasters in January 2020 had expected it would, with the various segments of G.D.P. retaining a steady share of the economic pie.Services consumption in the second quarter remained 7.4 percent below the level it would have maintained in that alternate universe, while spending on durable goods remained 34 percent higher.Those are extraordinary shifts in what the economy is being asked to produce, and it is hardly shocking that the physical goods side of the economy would be straining at capacity in light of such an epic reallocation of demand.What has happened in recent months is not Americans shifting spending away from physical goods and toward services, but rather buying more of both, however with varying growth rates. Spending on durable goods rose at a 9.9 percent rate in the second quarter after a 50 percent rise in the first quarter. Spending on services rose 12 percent in the second quarter.Those numbers are, in effect, driving the supply strains for many physical goods.Moreover, the second-quarter data predates the surge in virus cases from the Delta variant. We don’t know yet whether its spread will affect the economy in any meaningful way, but if it does, the likely effects include making supply strains of physical goods worse and slowing the rebalancing of the economy toward services.It would be unrealistic to expect the economic trauma of 2020 to be fixed in just a few quarters, but what the drumbeat of data — both on economic output and employment — shows is that it really is going to be a grind to arrive at a new equilibrium.It’s fantastic news, of course, that the economic expansion remains robust. There was only a single quarter from 2001 to 2019 in which the annualized growth rate exceeded 6 percent; in 2021 there have now been two in a row.The healing is happening. But the new numbers reflect just how severe the scars of last year really were. More

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    How NYC Faces a Lasting Economic Toll Even as the Coronavirus Pandemic Passes

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    Gabriela Bhaskar/The New York TimesNew York City is beginning to rebound from the economic devastation of the pandemic.But it won’t be easy. Neighborhoods remain pockmarked by vacant commercial real estate, and the city’s unemployment rate remains almost twice the national average.While there are signs that the city is coming back to life, the path forward is anything but clear.New York Faces Lasting Economic Toll Even as Pandemic PassesThe city’s prosperity is heavily dependent on patterns of work and travel that may be irreversibly altered.Nelson D. Schwartz, Patrick McGeehan and As the national economy recovers from the pandemic and begins to take off, New York City is lagging, with changing patterns of work and travel threatening the engines that have long powered its jobs and prosperity.New York has suffered deeper job losses as a share of its work force than any other big American city. And while the country has regained two-thirds of the positions it lost after the coronavirus arrived, New York has recouped fewer than half, leaving a deficit of more than 500,000 jobs.New York City lost greatest share of jobs among 20 largest U.S. citiesThe city had an 11.8 percent decline in jobs from February 2020 to April 2021, almost three times the loss on the national level.

    Source: Center for New York City Affairs at the New SchoolTaylor JohnstonRestaurants and bars are filling up again with New Yorkers eager for a return to normal, but scars are everywhere. Boarded-up storefronts and for-lease signs dot many neighborhoods. Empty sidewalks in Midtown Manhattan make it feel like a weekend in midweek. Subway ridership on weekdays is less than half the level of two years ago.The city’s economic plight stems largely from its heavy reliance on office workers, business travelers, tourists and the service businesses catering to all of them. All eyes are on September, when many companies aim to bring their workers back to the office and Broadway fully reopens, attracting more visitors and their dollars. But even then, the rebound will be only partial.The shift toward remote work endangers thousands of businesses that serve commuters who are likely to come into the office less frequently than before the pandemic, if at all. By the end of September, the Partnership for New York City, a business advocacy group, predicts that only 62 percent of office workers will return, mostly three days a week.Restoring the city to economic health will be an imposing challenge for its next mayor, who is likely to emerge from the Democratic primary on Tuesday. The candidates have offered differing visions of how to help struggling small businesses and create jobs.“We are bouncing back, but we are nowhere near where we were in 2019,” said Barbara Byrne Denham, senior economist at Oxford Economics. “We suffered more than everyone else, so it will take a little longer to recover.”At 10.9 percent in May, the city’s unemployment rate was nearly twice the national average of 5.8 percent. In the Bronx, the city’s poorest borough, the rate is 15 percent. Workers in face-to-face sectors like restaurants and hospitality, many of whom are people of color, are still struggling.“While the recovery has probably exceeded expectations, unemployment remains staggeringly high for Black and brown individuals and historically marginalized communities,” said Jose Ortiz Jr., chief executive of the New York City Employment and Training Coalition, a work force development group.At the same time, hundreds of small businesses, which before the pandemic employed about half of the city’s work force, didn’t survive. And many that did are saddled with debt they took on to survive the downturn and owe tens of thousands of dollars in back rent.“I have a huge amount of debt to pay back because I had to borrow all over the place to stay alive,” said Robert Schwartz, the third-generation owner of Eneslow Shoes & Orthotics. He closed two of his four stores, but kept open branches on Manhattan’s Upper East Side and in Little Neck, Queens. “We’ll survive, but it’s going to be a long, slow recovery.”Office buildings in Lower Manhattan. The city depends more heavily than other places on office workers, business travelers, and the service businesses catering to all of them.Gabriela Bhaskar/The New York TimesEven if just 10 percent of Manhattan office workers begin working remotely most of the time, that translates into more than 100,000 people a day not picking up a coffee and bagel on their way to work or a drink afterward.Gabriela Bhaskar/The New York TimesEmpty sidewalks in parts of the city once filled with office workers make it feel like a weekend in midweek.Gabriela Bhaskar/The New York TimesOne crucial factor in the city’s economic trajectory, civic and business leaders say, is addressing safety concerns. Violent crime has risen since the pandemic hit — including a high-profile Times Square shooting in May that wounded two women and a 4-year-old girl — and the police have recently increased Midtown foot patrols.“The negatives of New York life are worse,” said Seth Pinsky, chief executive of the 92nd Street Y, a longtime cultural destination on the Upper East Side.“Crime is going up and the city is dirtier,” added Mr. Pinsky, who served as president of the city’s Economic Development Corporation under former Mayor Michael R. Bloomberg. “It’s critical that we get the virtuous cycle going again.”On Friday, Mayor Bill de Blasio said on a radio show on WNYC that the city had more police officers in the subway than at any time in the last 25 years. “We want to really encourage people back, to protect everyone,” he said.Nonetheless, worries about crime are frequently cited by workers who have returned. “There are questions from employees about safety in the city and increased concern,” said Jonathan Gray, president of the financial behemoth Blackstone. “My hope is that as the city fills up there will be less of that.”New York is certainly feeling less deserted than it did a few months ago. Nearly 195,000 pedestrians strolled through Times Square on June 13, more than twice the typical number in the bleak winter days when the coronavirus was raging. That’s a long way from the 365,000 who passed through daily before the pandemic, but the totals are edging higher, according to Tom Harris, president of the Times Square Alliance, a nonprofit group that promotes local businesses and the neighborhood.Change in foot traffic in New York City, by type of location

    Foot traffic data was aggregated and anonymized by Foursquare from smartphone apps that shared location data. Data as of June 18, 2021.Source: FoursquareTaylor JohnstonWhen Mr. Gray returned to Blackstone’s Midtown headquarters last summer, there were just 16 other people spread over 19 floors. Today, there are more than 1,600, and Blackstone is asking all employees who have been vaccinated to return.“It’s gone from feeling super lonely and now it’s feeling pretty normal,” Mr. Gray added.Wall Street and the banking sector are pillars of the city’s economy, and they have been among the most aggressive industries in prodding employees to go back to the office. James Gorman, the chief executive of Morgan Stanley, told investors and analysts this month that “if you want to get paid in New York, you need to be in New York.”Many firms, including Blackstone and Morgan Stanley, have huge real estate holdings or loans to the industry, so there is more than civic pride in their push to get workers to return. Technology companies like Facebook and Google are increasingly important employers as well as major commercial tenants, and they have been increasing their office space. But they have been more flexible about letting employees continue to work remotely.Google, which has 11,000 employees in New York and plans to add 3,000 in the next few years, intends to return to its offices in West Chelsea in September, but workers will only be required to come in three days a week. The company has also said up to 20 percent of its staff can apply to work remotely full time.The decision by even a small slice of employees at Google and other companies to stay home part or all of the week could have a significant economic impact.Even if just 10 percent of Manhattan office workers begin working remotely most of the time, that translates into more than 100,000 people a day not picking up a coffee and bagel on their way to work or a drink afterward, said James Parrott, an economist with the Center for New York City Affairs at the New School.“I expect a lot of people will return, but not all of them,” he said. “We might lose some neighborhood businesses as a result.”The absence of white-collar workers hurts people like Danuta Klosinski, 60, who had been cleaning office buildings in Manhattan for 20 years. She is one of more than about 3,000 office cleaners who remain out of work, according to Denis Johnston, a vice president of their union, Local 32BJ of the Service Employees International Union.Ms. Klosinski, who lives in Brooklyn, said that she had been furloughed twice since last spring and that she had been idle since November. She said she feared that if she were not recalled by September, she would lose the health insurance that covers her husband, who suffered a stroke and a heart attack.“I’m worried about losing everything,” she said.Also weighing on the city’s outlook is the decline in visits by tourists, who are venturing back in dribbles, not in droves.Performers in Times Square, which saw nearly 195,000 pedestrians pass through on a recent day. That’s a long way from the 365,000 who passed through daily before the pandemic.Gabriela Bhaskar/The New York TimesAn ice cream vendor waited for customers at Bryant Park in Midtown.Gabriela Bhaskar/The New York TimesPassengers aboard a cruise to the Statue of Liberty. City officials expect that it will take at least a few years to draw as many visitors as in 2019.Gabriela Bhaskar/The New York TimesIn 2019, New York welcomed over 66 million out-of-towners, and they spent more than $45 billion in hotels, restaurants, shops and theaters. City officials expect that it will take years to draw so many visitors again, especially the bigger-spending foreign tourists and business travelers on expense accounts.Ellen V. Futter, president of the American Museum of Natural History, said domestic tourism was rebounding faster than she had expected. “The local population is out and about and happy to be so,” Ms. Futter said. But the scarcity of international visitors “is going to tamp down the pace of recovery,” she said.That lag will spell prolonged pain for many businesses. Employment in hotels and restaurants is about 150,000 lower than it was before the pandemic, while the number of jobs in the performing arts is down about 40,000.To be sure, there are signs of a strengthening economy. After many residents fled the city last year, high-priced condos are again being snapped up, and the rental market is showing signs of firming after price drops.Rudin Management, the real estate giant, is trimming back the concessions it offered to attract tenants at the height of the pandemic. “I’m getting calls from people saying their son or daughter or grandson or granddaughter is graduating and asking for an apartment,” said William C. Rudin, the firm’s chief executive. “We didn’t get those calls for a year.”New Yorkers are also getting out more. When the Rockaway Hotel in Queens opened in September after years of planning, a hip destination in a historically working-class beach neighborhood, “people who lived four blocks away would take hotel rooms for the night because they wanted a staycation,” said Terence Tubridy, a managing partner.Since indoor dining resumed in February, the 53-room hotel’s weekend occupancy rate has been 80 percent, Mr. Tubridy said. Along with more visitors recently from California and the Midwest, he reports a flood of inquiries about weddings and birthday parties.As the hotel prepares for its first opportunity to serve the bustling summer crowds at Rockaway Beach, Mr. Tubridy is looking to add 100 employees to his current staff of 180.Amy Scherber is also seeing signs of better days. When the pandemic struck, she was forced to close all but two of her Amy’s Bread shops in New York City and lay off more than 100 employees. She wound up making cakes and pastries herself in a kitchen in Long Island City, Queens.But now, Ms. Scherber has rehired some of her employees, and a crew of four bakers is handling the pastries while she oversees the steadily increasing production of baguettes and other loaves. She has reopened her store in Chelsea Market, a Manhattan tourist destination, and is preparing to reopen other retail locations. Her wholesale business is also rebounding as restaurants that were closed for months are again ordering dinner rolls.“In the last couple of weeks, we finally have seen the business starting to pick up a bit,” said Ms. Scherber, who started her operation 29 years ago. She is hopeful about a strong recovery, she said. But she added, “I see the city taking several years to be the economy it was.”The Empire State Building and One World Trade Center.Gabriela Bhaskar/The New York Times More