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From Unicorns to Zombies: Tech Start-Ups Run Out of Time and Money

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After staving off collapse by cutting costs, many young tech companies are out of options, fueling a cash bonfire.WeWork raised more than $11 billion in funding as a private company. Olive AI, a health care start-up, gathered $852 million. Convoy, a freight start-up, raised $900 million. And Veev, a home construction start-up, amassed $647 million.In the last six weeks, they all filed for bankruptcy or shut down. They are the most recent failures in a tech start-up collapse that investors say is only beginning.After staving off mass failure by cutting costs over the past two years, many once-promising tech companies are now on the verge of running out of time and money. They face a harsh reality: Investors are no longer interested in promises. Rather, venture capital firms are deciding which young companies are worth saving and urging others to shut down or sell.It has fueled an astonishing cash bonfire. In August, Hopin, a start-up that raised more than $1.6 billion and was once valued at $7.6 billion, sold its main business for just $15 million. Last month, Zeus Living, a real estate start-up that raised $150 million, said it was shutting down. Plastiq, a financial technology start-up that raised $226 million, went bankrupt in May. In September, Bird, a scooter company that raised $776 million, was delisted from the New York Stock Exchange because of its low stock price. Its $7 million market capitalization is less than the value of the $22 million Miami mansion that its founder, Travis VanderZanden, bought in 2021.“As an industry we should all be braced to hear about a lot more failures,” said Jenny Lefcourt, an investor at Freestyle Capital. “The more money people got before the party ended, the longer the hangover.”Getting a full picture of the losses is difficult since private tech companies are not required to disclose when they go out of business or sell. The industry’s gloom has also been masked by a boom in companies focused on artificial intelligence, which has attracted hype and funding over the last year.But approximately 3,200 private venture-backed U.S. companies have gone out of business this year, according to data compiled for The New York Times by PitchBook, which tracks start-ups. Those companies had raised $27.2 billion in venture funding. PitchBook said the data was not comprehensive and probably undercounts the total because many companies go out of business quietly. It also excluded many of the largest failures that went public, such as WeWork, or that found buyers, like Hopin.Carta, a company that provides financial services for many Silicon Valley start-ups, said 87 of the start-ups on its platform that raised at least $10 million had shut down this year as of October, twice the number for all of 2022.This year has been “the most difficult year for start-ups in at least a decade,” Peter Walker, Carta’s head of insights, wrote on LinkedIn.Venture investors say that failure is normal and that for every company that goes out of business, there is an outsize success like Facebook or Google. But as many companies that have languished for years now show signs of collapse, investors expect the losses to be more drastic because of how much cash was invested over the last decade.From 2012 to 2022, investment in private U.S. start-ups ballooned eightfold to $344 billion. The flood of money was driven by low interest rates and successes in social media and mobile apps, propelling venture capital from a cottage financial industry that operated largely on one road in a Silicon Valley town to a formidable global asset class akin to hedge funds or private equity.During that period, venture capital investing became trendy — even 7-Eleven and “Sesame Street” launched venture funds — and the number of private “unicorn” companies worth $1 billion or more exploded from a few dozen to more than 1,000.But the advertising profits gushing from the likes of Facebook and Google proved elusive for the next wave of start-ups, which have tried untested business models like gig work, the metaverse, micromobility and cryptocurrencies.Now some companies are choosing to shut down before they run out of cash, returning what remains to investors. Others are stuck in “zombie” mode — surviving but unable to grow. They can muddle along like that for years, investors said, but will most likely struggle to raise more money.Convoy, the freight start-up that investors valued at $3.8 billion, spent the last 18 months cutting costs, laying off staff and otherwise adapting to the difficult market. It wasn’t enough.As the company’s money ran low this year, it lined up three potential buyers, all of whom backed out. Coming so close, said Dan Lewis, Convoy’s co-founder and chief executive, “was one of the hardest parts.” The company ceased operations in October. In a memo to employees, Mr. Lewis called the situation “the perfect storm.”Such port-mortem assessments, where founders announce their company is closing and reflect on lessons learned, have become common.One entrepreneur, Ishita Arora, wrote this week that she had to “confront reality” that Dayslice, her scheduling software start-up, was not attracting enough customers to satisfy investors. She returned some of the cash she had raised. Gabor Cselle, a founder of Pebble, a social media start-up, wrote last month that despite feeling that he had let the community down, trying and failing was worth it. Pebble is returning to investors a small portion of the money it had raised, Mr. Cselle said. “It felt like the right thing to do.”Amanda Peyton was surprised by the reaction to her blog post in October about the “dread and loneliness” of shutting down her payments start-up, Braid. More than 100,000 people read it, and she was flooded with messages of encouragement and gratitude from fellow entrepreneurs.Ms. Peyton said she had once felt that the opportunity and potential for growth in software was infinite. “It’s become clear that that’s not true,” she said. “The market has a ceiling.”Venture capital investors have taken to gently urging some founders to consider walking away from doomed companies, rather than waste years grinding away.“It might be better to accept reality and throw in the towel,” Elad Gil, a venture capital investor, wrote in a blog post this year. He did not respond to a request for comment.Ms. Lefcourt of Freestyle Ventures said that so far, two of her firm’s start-ups had done exactly that, returning 50 cents on the dollar to investors. “We’re trying to point out to founders, ‘Hey, you don’t want to be caught in no man’s land,’” she said.One area that is thriving? Companies in the business of failure.SimpleClosure, a start-up that helps other start-ups wind down their operations, has barely been able to keep up with demand since it opened in September, said Dori Yona, the founder. Its offerings include helping prepare legal paperwork and settling obligations to investors, vendors, customers and employees.It was sad to see so many start-ups shutting down, Mr. Yona said, but it felt special to help founders find closure — both literally and figuratively — in a difficult time. And, he added, it is all part of Silicon Valley’s circle of life.“A lot of them are already working on their next companies,” he said.Kirsten Noyes More

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    WeWork Bankruptcy Would Deal Another Blow to Ailing N.Y. Office Market

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    The fallout would be particularly hard for landlords already struggling with piling debt and companies scaling back their office footprint.For years, landlords around the world clamored to get WeWork into their office buildings, a love affair that made the co-working company the largest corporate tenant in New York and London.Now, WeWork is perhaps days away from a bankruptcy filing — and its demise could not come at a worse time for office landlords.With fewer employees going into the office since the pandemic, companies have slashed the amount of space they lease, causing one of the worst crunches in decades in commercial real estate.Many landlords have accepted lower rents from WeWork in recent years to keep it afloat, but its bankruptcy would be an enormous blow. The pain would be centered on landlords that have leased a large proportion of their space to the company, particularly in New York, and are struggling to make payments on the debt tied to their buildings. Some landlords might quickly accept lower rents from WeWork as part of a bankruptcy reorganization and keep doing business with any new entity that emerges, but others might have to fight in court to get anything.“If you look at a lot of the vacancy in New York City, you will find that a fair amount of that was space that was leased to WeWork — and there will be even more abandoned after a bankruptcy,” said Anthony E. Malkin, the chief executive of the company that owns the Empire State Building and an early skeptic of WeWork.WeWork, despite its efforts to cut costs, still had an empire of 777 locations in 39 countries at the end of June, compared with 764 locations in 38 countries nearly two years earlier. On Friday, its website listed 47 locations in New York, where at the end of March it leased 6.9 million square feet of office space, equivalent to more than 60 percent of all co-working space, according to Savills, a real estate services firm. In London, WeWork listed 38 locations.Speculation of a possible bankruptcy filing intensified in August when WeWork warned that it might not be in business much longer. Its shares have fallen 90 percent since then.Last month, WeWork said it would miss interest payments totaling $95 million. After a 30-day grace period, the company reached a deal with creditors for a seven-day forbearance, which expires Tuesday.A WeWork office space in London. The city has 38 WeWork locations.Tolga Akmen/Agence France-Presse — Getty ImagesIn New York, where a fifth of office space is unleased or being offered for the sublet, the highest amount in decades, the fallout from a WeWork bankruptcy would be felt most in older office buildings in Midtown and downtown Manhattan. Nearly two-thirds of WeWork’s leases in Manhattan were in these so-called Class B and Class C buildings, according to the real estate advisory firm Avison Young.“We believe the value of Class B and Class C buildings will probably be 55 percent less than they were prior to the pandemic,” said Stijn Van Nieuwerburgh, a real estate professor at Columbia Business School who has been tracking the decline in office building valuations. “These are the buildings that are struggling the most and will have a tough time with a WeWork bankruptcy.”Owners of these older buildings were thrilled a few years ago to lease entire floors — or even entire buildings — to WeWork, but they now find themselves under siege. In cases where WeWork has stopped paying rent on the leases, landlords have been unable to make debt payments on buildings that are being valued sharply lower than they were a few years ago.That’s the quandary facing Walter & Samuels, a real estate firm that has WeWork as a tenant in five of its office buildings in New York. At one, 315 West 36th Street, a small edifice built in 1926 in Manhattan’s garment district, WeWork leased about 90 percent of the space and stopped paying rent earlier this year, according to Morningstar Credit. Walter & Samuels stopped making payments on a $77 million loan on the building, Morningstar said.The loan’s special servicer said the appraised value of the building had fallen to $42 million, down from $127 million when the loan was made five years ago, and the servicer is moving to foreclose, according to Morningstar.Executives at Walter & Samuels did not respond to emails seeking comment.WeWork occupies nearly all of the office space at 980 Avenue of the Americas, a mixed-use development owned by the Vanbarton Group. Joey Chilelli, a managing director at the company, said the firm could consider a range of options for the space if WeWork vacated, including turning it into residences.“We have tried to do everything we could earlier this year when they went to every landlord and asked for rent reductions and concessions,” Mr. Chilelli said. “If they are able to reduce their footprint, it will hurt the office market again.”A WeWork bankruptcy would be felt most in older office buildings in Midtown and downtown Manhattan.Hilary Swift for The New York TimesMichael Emory, the founder of Allied, a real estate investment trust that operates office buildings in Canada’s largest cities, said his company walked away from a potential deal with WeWork in Toronto in 2015 because there were drawbacks for Allied. But he said he had watched other developers, particularly in New York, lease space to the company, believing that co-working providers would occupy a large percentage of office space for years.Also, Mr. Emory said, WeWork focused on landlords that were eager to fill up their office buildings and then sell them based on the new occupancy and rental income.A bankruptcy filing “will be very consequential for the New York market,” he said.WeWork declined to comment for this article.At its peak, when investors were feverishly bullish about the company and the vision of Adam Neumann, its eccentric co-founder, WeWork was valued at $47 billion. Its model was to rent office space, spruce it up and charge its customers — established companies, start-ups and individuals — to use the space for as long as they needed it.The flexibility of using a WeWork space — and its community vibe: “Our mission is to elevate the world’s consciousness,” the company declared — was supposed to attract businesses away from stodgy offices that tied tenants down with yearslong leases.But the economics of WeWork’s business were always upside down: What the company took in from customers was not enough to cover the cost of renting and operating its locations. It kept growing anyway, and from the end of 2017, it lost a staggering $15 billion. After WeWork withdrew an initial public offering in 2019, its largest outside investor — the Japanese conglomerate SoftBank — provided a lifeline with a multibillion-dollar takeover.Before that debacle, WeWork had ardent fans in the commercial real estate world who believed the company was pioneering an exciting new service.“We know these folks, we know them well,” Steven Roth, the chief executive of Vornado Realty Trust, one of the largest office landlords in New York, said in 2017. “We think what they’re doing is unbelievably impressive.”Mr. Roth declined to comment for this article. Vornado leased space to WeWork in a building in Manhattan and another in Washington, and they teamed up outside Washington to introduce WeLive residences, one of WeWork’s much-hyped but failed subsidiaries, including the for-profit private school WeGrow.Vornado no longer has WeWork as a tenant. In 2019, after questions about WeWork’s financial health mounted in the industry, Vornado’s chief financial officer said the company had limited its exposure to WeWork.The president of BXP, a part owner of an office development in the Brooklyn Navy Yard, said WeWork had stopped paying rent there.Karsten Moran for The New York TimesJLL, a real estate services firm, once predicted that co-working firms would be leasing 30 percent of all office space in the United States by the end of this decade. Such predictions did not seem outlandish just before the pandemic, when WeWork and other co-working providers accounted for 15 percent of both new and renewed leases signed in New York, according to JLL, up from 2 percent in 2010. Co-working providers accounted for less than 1 percent of all leases signed in New York last year, JLL said.And some landlords believed they would be somewhat insulated from problems at WeWork.“WeWork is out there taking on these start-ups en masse, realizing that some will stay, some will go,” Raymond A. Ritchey, an executive at BXP, formerly known as Boston Properties, said in 2014. “But they tend to be taking that risk as opposed to the landlord on a direct basis.”BXP is a part owner of a shiplike office development in the Brooklyn Navy Yard, Dock 72, where WeWork has been a major tenant since it opened in 2019 but was struggling to fill its space. At the end of last year, BXP was leasing nearly 500,000 square feet of space to WeWork across its portfolio.Douglas T. Linde, the president of BXP, said Thursday on an investor call that WeWork had stopped paying rent at two of its locations, including Dock 72. “We don’t expect WeWork to exit all the assets,” he said, “nor do we expect them to remain in place in the current footprint.”Some landlords might be able to get other co-working companies to take over WeWork’s spaces, or operate their own version, avoiding a situation in which their buildings appear desolate. But they are unlikely to take in the revenue they were initially getting from WeWork, which did end up going public, in 2021, by merging with a special-purpose acquisition company.Mr. Malkin, the Empire State Building landlord, said he had always doubted WeWork’s business model. Also, he never wanted WeWork in his company’s buildings because, he said, it packed too many people into its spaces, causing overuse of elevators and toilets.“Why would you want to do business with these people?” Mr. Malkin said. More

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    Big Tech Makes a Big Bet: Offices Are Still the Future

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    TEMPE, Ariz. — Early in the pandemic, when shops along Mill Avenue in downtown Tempe closed their doors and students at nearby Arizona State University were asked to go home, the roar of construction continued to fill the air. Now, gleaming in the sunlight and stuffed with amenities, towering glass office buildings have sprouted up all over the Phoenix metropolitan area.Arizonans are about to have new next-door neighbors. And they include some of the technology industry’s biggest names.DoorDash, the food delivery company, moved into a new building on the edge of a Tempe reservoir in the summer of 2020. Robinhood, the financial trading platform, rented out a floor in an office nearby. On a February morning, construction workers were putting the finishing touches on a 17-story Tempe office building expected to add 550 Amazon workers to the 5,000 already in the area.The frenetic activity in the Phoenix suburbs is one of the most visible signs of a nationwide recovery in commercial office real estate fueled by the tech industry, which has enjoyed unchecked growth and soaring profits as the pandemic has forced more people to shop, work and socialize online.Big tech companies like Meta and Google were among the first to allow some employees to work from home permanently, but they have simultaneously been spending billions of dollars expanding their office spaces. Doubling down on offices may seem counterintuitive to the many tech workers who continue to work remotely. In January, 48 percent of people in computer and math fields and 35 percent of those in architecture or engineering said they had worked from home at some point because of the pandemic, according to the Bureau of Labor Statistics.But companies, real estate analysts and workplace experts said several factors were propelling the trend, including a hiring boom, a race to attract and retain top talent and a sense that offices will play a key role in the future of work. In the last three quarters of 2021, the tech industry leased 76 percent more office space than it did a year earlier, according to the real estate company CBRE.A view of Camelback Mountain and Papago Park in Phoenix from 100 Mill. Adam Riding for The New York Times“I think there are a lot more companies that are saying, ‘You’re coming back to work’ — it’s not ‘if,’ it’s ‘when,’” said Victor Coleman, the chief executive of Hudson Pacific Properties, a real estate investment group. “The reality is that most companies are currently working from home but are wanting and planning to come back to the office.”Debates over whether workers should be required to return to the office can be thorny because some employees say they have been happier and more productive at home. One way companies are trying to lure them back is by splurging on prime office space with great amenities.Big Tech executives say that office expansions are to be expected and that modernized buildings will probably be spaces for people to collaborate rather than stare at screens. Meta, the parent company of Facebook, leased 730,000 square feet in Midtown Manhattan in August 2020, and has added space in Silicon Valley as well as in Austin, Texas; Boston; Chicago; and Bellevue, Wash.“We will continue to grow and expect many people to return to our offices around the world once it’s safe,” said Tracy Clayton, a Meta spokesman.Big Tech executives anticipate more office expansions, another sign that companies are shifting their expectations for employees.Adam Riding for The New York TimesGoogle said early last year that it would spend $7 billion on new and expanded offices and data centers around the country in 2021, including $2.1 billion to buy a Manhattan office building by the Hudson River, and growth in Atlanta; Silicon Valley; Boulder, Colo.; Durham, N.C.; and Pittsburgh. Google also said in January that it would spend $1 billion on a London office building.Offices “remain an important part of supporting our hybrid approach to work in the future,” Google said in a statement.During the pandemic, Microsoft has expanded in Houston; Miami; Atlanta; New York; Arlington, Va.; and Hillsboro, Ore. The company was growing to accommodate the many new employees it has hired over the last two years, said Jared Spataro, the vice president of modern work for Microsoft.“The pandemic, I think, has just changed people’s perception of what’s possible in terms of geographic distribution,” Mr. Spataro said.In April, Apple said it would build a campus near Raleigh, N.C., and has added space in San Diego and Silicon Valley. The company, which has battled with its employees over its plan for a majority of workers to return to offices most days each week, referred to its April news release about expansion but declined to comment further.Salesforce, whose signature tower looms over the San Francisco skyline, is moving forward with four new office towers planned before the pandemic, in Tokyo, Dublin, Chicago and Sydney, Australia. The company said last February that many employees could be fully remote, but shifted its messaging months later, saying that “something is missing” without office life and urging workers to come back in.Salesforce’s thinking about the office has evolved, said Steve Brashear, the company’s senior vice president in charge of real estate. At the start of the pandemic, the feeling was that “being remote sounds so great and so safe,” Mr. Brashear said. Now, “the idea of being isolated as a remote worker has its drawbacks.”The rooftop deck at Grand 2, where DoorDash employees work. Tech companies have tried to coax their workers back to the office by offering amenities.Adam Riding for The New York TimesThe industry’s search for land has been so extensive that it has surged through longtime tech hubs like Silicon Valley and into areas not traditionally known for their tech scenes.In Phoenix, for instance, tech leasing activity grew more than 300 percent from mid-2020 to mid-2021. New leases, subleases and renewals in the area totaled more than one million square feet from April through September last year, up from about 260,000 square feet a year earlier, according to CBRE.Other locations not normally associated with tech also saw growth. In Vancouver, British Columbia, tech leasing activity doubled in growth in mid-2021, to 561,000 square feet from 268,000, as did activity in Charlotte, N.C., to 143,000 square feet from 71,000.Amazon has been one of the most prolific in expansion, announcing in 2020 that it would increase its white-collar work force in half a dozen cities. In Phoenix, its logo is ubiquitous, and it will occupy five floors in the new Tempe office building expected to be finished this year.Holly Sullivan, Amazon’s vice president of economic development, said adding to its regional hubs allowed the company “to tap into wider and more diverse talent pools, provide increased flexibility for current and future employees, and create more jobs and economic opportunity across the country.”For developers, the focus on offices is good for business, and some interpret the growth as an indictment of the fully remote model.The thinking on remote work is “like a pendulum — it swung a little bit too far, and now it’s come back a little bit,” said George Forristall, the Phoenix real estate director at Mortenson Development.The Watermark office building at the edge of Tempe Town Lake, home to WeWork, Robinhood and some Amazon employees.Adam Riding for The New York TimesThe flurry of expansions also highlights how much better tech has fared than other industries during the pandemic. In some cities, remote work and high vacancy rates continue to hurt restaurants and retailers.Office vacancy rates in San Francisco climbed to 22.4 percent at the end of 2021 from 21.5 percent in the third quarter of the year, according to Jones Lang LaSalle, a real estate firm. The city’s economists called tourism and office vacancies “special areas of concern in the city’s economic outlook.” In New York, office vacancy rates declined to 14.6 percent, according to JLL, but areas dependent on office workers to power local businesses, like Midtown Manhattan, are recovering more slowly.Smaller tech companies, given their financial constraints, might have to choose whether to invest in physical spaces or embrace a more flexible strategy. Twitter has continued to add offices in Silicon Valley, and video game developers like Electronic Arts and Epic Games have expanded in places like Canada and North Carolina. But others have cut back.Zynga, a gaming company, offered up its 185,000-square-foot San Francisco headquarters for sublease last summer because it decided that shrinking its physical office and moving would make life easier for employees, said Ken Stuart, vice president of real estate at Zynga. Its new building in San Mateo, Calif., will be less than half the size.“The reality is that people are frustrated by the commute and getting into the city, and also people feel like they can do better work by being hybrid,” Mr. Stuart said.By contrast, the largest tech giants “have so much money that it doesn’t matter,” said Anne Helen Petersen, a co-author of “Out of Office,” a recent book about the remote-work era. Because of their huge budgets, Ms. Petersen suggested, such companies can continue constructing offices without worrying about how much money they stand to lose if the buildings become obsolete.“They’re hedging their bets,” Ms. Petersen said. “If the future’s going to be fully distributed, ‘we’ll be setting up an apparatus for that.’ If the future’s going to rubber-band back to everyone back to the office, the way it was in 2020, ‘we’ll go back to that.’”In Tempe, the two-floor WeWork co-working space at the Watermark, one of the premier office spaces, was buzzing with activity on a recent afternoon. Upstairs, Amazon has rented an entire floor.Below, amid leafy plants and colorful lighting, employees at tech start-ups clacked away on MacBooks and sketched on whiteboards. Many said it had become more crowded in recent months, and more companies were renting the small office spaces within the WeWork.The WeWork co-working space at Tempe’s Watermark office. Tech employees there say more people have been coming in and leasing space in recent months.Adam Riding for The New York TimesSam Jones, a co-founder of a nonfungible token start-up, Honey Haus, said his company had been renting a four-person space within WeWork for $1,850 a month since October.“I am just way less productive at home,” Mr. Jones said. “People are definitely, I think, realizing that physical space just has something special to it.” More

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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