Return-to-Office Real and Accelerating in NYC

Over the past 10 weeks, office utilization in the 10 largest US cities has rebounded to 99.6% of pre-Omicron levels. Office utilization in NYC is 98.5% of the prior peak, and its current pace of recovery is the fastest of any market outside of Texas.

Transit ridership, and restaurant data suggest that New York’s return-to-office trends “are very real and accelerating,” according to a new report by BTIG.

Additionally, apartment occupancy and rent growth trends suggest that workers are back in New York, even if they’re not yet back in the office.

Full Recovery: A Ways to Go

That said, concerning crime statistics and a stubborn office using employment recovery hint that New York City’s office recovery still has a long way to go.

As of March 10, NYC subway and bus ridership was 57.4% of pre-pandemic levels, just 90 bps below the prior peak. Train ridership (LIRR and Metro-North) is the most highly correlated variable to office utilization, and is 630 bps below its prior peak, which suggests the recent recovery has been driven by employees living closer to the city, according to BTIG. 

While OpenTable’s data shows a steady improvement in NYC restaurant visitations, the city’s dining recovery has been the second-slowest among coastal markets. That said, during the week of March 10, a Bloomberg Index indicated sales in the restaurant’s Midtown stores have improved 1,600 bps over the last two weeks to the highest level since 2019.

As of Feb. 28, NYC’s apartment occupancy was 98.3%, the highest level on record and 220 bps higher than YE 2019. “We suspect employees have come back to New York, but have not yet fully embraced the return-to-office,” according to the report.

Felony Crime a Concern

Crime could disrupt any urban traffic improvement. Major felonies in NYC increased 7.5% between 2021 and 2019, though robbery, burglary, and felony assaults were up a combined 149.5% in the Midtown South Precinct, which includes Grand Central, Penn Station, Port Authority, and Times Square. Furthermore, this trend has gotten worse in 2022, with major felonies in Midtown South up 57.5% y-o-y.

Lagging office using employment (OUE) could slow NYC’s recovery. As of the end of January 2022, NYC’s OUE was down (3.8%) from Q4 19 having recovered 64.5% of the jobs lost during the pandemic, while the US overall has recovered 94.6% of lost jobs.