Remote Work Is Costing Manhattan More Than $12 Billion a Year

Three years into the pandemic, business leaders and city officials around the world are still trying just about everything to lure employees back into offices and revive local economies. But new data on in-person work analyzed by Bloomberg News show that in a number of cities across the US, Fridays at the office are dead. Mondays are a crapshoot. And returning to pre-pandemic work schedules looks like a lost cause.

Nowhere is the economic cost of remote work more pronounced when it comes to spending than in the world’s leading financial center: New York. Manhattan workers are spending at least $12.4 billion less a year due to about 30% fewer days in the office, according to a Bloomberg News analysis using exclusive data from Stanford University economist Nicholas Bloom’s WFH Research group. That figure was calculated by multiplying the annual inflation-adjusted loss in spending per worker by the US Census Bureau’s estimated nearly 2.7 million commuters and residents who worked in Manhattan in 2019.

That means the average worker is spending $4,661 less per year on meals, shopping and entertainment near their offices in New York. That compares to $3,040 in San Francisco and $2,387 in Chicago. These behaviors are most entrenched in cities with longer commutes, a higher proportion of white-collar workforces and longer-lasting pandemic restrictions.

Losing $12.4 billion a year translates into missed sales for restaurants, retailers and other businesses that drive New York’s economic engine. Office vacancies pose a multibillion-dollar crisis for America’s biggest office real estate market. The transit system’s finances are in free fall. Chief executives like Goldman Sachs Group Inc.’s David Solomon and JPMorgan Chase & Co.’s Jamie Dimon are growing impatient with workers. And the fiscal threat to tax revenue verges on the existential: What is the value of a city when workers don’t need to be there anymore?

“If less income tax is being paid in New York City,” said Comptroller Brad Lander, “then it’s hard to figure out how to capture enough value to maintain the subways and invest in the schools and keep the city safe and clean and all the things that really matter.”

How New York fares is instructive for other financial centers around the world: Only 6% of Londoners previously able to work from home said their employers expect them to be in the office five days a week, according to a report from the mayor’s office. And last year, about 14% of jobs posted in all of Tokyo’s 23 wards were mostly remote, compared with 3% in 2019, according to job site Indeed.

When a city’s commuting base disappears, sales and transit revenue fall, the commercial property tax base shrinks and “labor income shrinks for people who provide goods and services to those workers,” Steven Davis, senior fellow at the Hoover Institution, a conservative think tank, said in a recent panel.

Across the US, spending has grown from 2019, according to Mastercard SpendingPulse, which measures in-store and online retail sales across all forms of payment. But disparities between the days of the week are evident in New York: Overall US spending in October 2022 rose by an average 23% on Fridays, compared with 20% in the Greater New York area and just 11% in Manhattan. The numbers don’t account for inflation.

“Less spending by workers in the central areas means a lot less sales tax revenue,” said Jose Maria Barrero, a professor at Mexico’s Instituto Tecnologico Autonomo and researcher with the WFH group who calculated the figures for Bloomberg. “If you have fewer commuters, that means less revenue.”

These shifts are most visible in Manhattan’s Financial District and Midtown, where trading desks and cubicles lay bare at the start and end of the week. Many restaurants and retailers have closed up shop and foot traffic and subway riders have plummeted.

Bankers, lawyers and other executives who expense black car rides to their New York City offices have also rejiggered their commuting schedules to focus on Tuesdays, Wednesdays and Thursdays, according to data from HQ Corporate Mobility, which works with Fortune 500 companies to book, bill and expense cars.

From June to December 2022, rides taken on Mondays and Fridays reached only around 33% and 38% of pre-pandemic levels, respectively, according to HQ data of about 400,000 rides over the last three years. On Thursdays, that rises to roughly 43%.

“On Fridays, I definitely want to be in the comfort of my own home,” said Nate Diaz, 24, who goes into the financial firm S&P Global on Tuesdays, when he knows his coworkers will be there.

At the office, he heads to lunch with colleagues — spending up to $20 on Chipotle or Chopt — and happy hours on Stone Street.

Diaz saves $100 a week by working from home, though he’ll sometimes grab coffee in his Astoria, Queens, neighborhood. He used the extra cash to buy new bulletin boards and a massage chair for his “souped-up” home office.

“People have changed their lifestyle and their behavior,” said Michelle Meyer, North America chief economist at Mastercard Economics Institute. “If you are working from home that day, you’re not commuting into your office, and going to the bodega next to your office.”

The growth has turned the neighborhoods where hybrid workers live into a new kind of business district. Foot traffic in New York’s four other boroughs recovered by 85% or more by the end of 2022 compared with pre-pandemic levels, according to data from Orbital Insight. Manhattan's recovery rate lags at 78%.

It’s more pronounced among restaurants and bars, where transactions increased by 48% in Brooklyn in the fourth quarter of 2022 from 2019, compared with 18% in Manhattan, according to data tracked by commerce company Square. The two boroughs were growing at the same rate pre-pandemic, according to Square Research Lead Ara Kharazian.

Average retail spending on Mondays in October rose by 28% in the Bronx, 21% in Queens and 18% in Brooklyn, compared with just 2% in Manhattan from the same period in 2019, according to Mastercard data.

Outer-borough growth could be a silver lining for New York, but a recently published plan to revive the city focuses less on the newly vibrant areas and more on inching back to a Manhattan-centric economy.

While Mayor Eric Adams now requires government employees to work in-person five days a week, he’s had less luck pushing business leaders to mandate stricter in-office requirements.

“It’s time,” he said last year. “New York City can’t run from home.”

Worker attendance at New York offices during the fourth quarter of 2022 recovered to about 43% of pre-pandemic levels on average, according to badge-tracking data from Kastle Systems. On Tuesdays, though, that jumps to an average 51% and plunges to 23% on Fridays.

Office attendance has ticked up when employers issue mandates for more in-person days, but they’re not a cure-all and a wide variability in company policies has left many pandemic-era habits in place. For example, Blackstone asked investment professionals to come into the office five days a week, but workday traffic at its headquarters at 345 Park Avenue remains half of its 2019 level. At American Express, which doesn’t have in-office requirements, only 31% of pre-pandemic workday traffic is back at its headquarters at 200 Vesey Street.

At eight major Manhattan office buildings, foot traffic is down about 52% on Fridays and 45% on Mondays compared with pre-Covid, according to a Bloomberg News analysis of Placer.ai data.

Researchers have modeled a 40% drop in office market value as office towers sit partially empty, which they estimate would cost $5 billion in lost tax revenue, or 5% of the city’s annual budget. New York’s future sales tax revenue could also diminish as half-empty office buildings drive sluggish spending. It could also take a hit to its income tax base if employees continue to relocate elsewhere.

“That’s a big hole that will need to be plugged with new taxes, lower spending,” said Columbia University professor Stijn Van Nieuwerburgh, who referred to the situation in a recent panel as a potential “urban doom loop.”

The city is still seeing the impacts on its transit system, where weekday ridership has recovered only 64% on average in January and revenue shortfalls are expected to hit over $2 billion a year through 2026.

With pandemic aid running out, the agency is planning service cuts to about seven lines on Mondays and Fridays, including the 1 train that connects Manhattan and the Bronx, and the L and F trains, which run across Brooklyn, Queens and Manhattan.

The change will be felt by working-class New Yorkers, who are back to work five or six days a week. “They can’t afford a $50 Uber,” and aren’t able to work remotely, said MTA Chief Executive Officer Janno Lieber in November.

While New York has a history of overcoming economic shocks like the September 11 terrorist attacks and the 2008 financial crisis, business owners say they are struggling to adapt to the new three-day workweek.

Sam’s Falafel owner Emad Ahmed said foot traffic near Wall Street is the worst it's been in his 30 years of business. Only on a sunny midweek day do sales recover to about 60% of what they were, he said. Meanwhile, the rising cost of gas and ingredients have pressured his business.

“Monday, Friday, forget about it,” said Ahmed, 57, who parks his truck in Zuccotti Park and notches only 30% of his pre-Covid revenue on those days. “You lose money when nobody is here.”

Jordan Cohen, the manager of Bryant Park Grill in Midtown Manhattan, said about 40% fewer diners are now showing up on Mondays and Fridays for the power lunch hub’s $22 chicken Caesar salad and $50 braised lamb shank.

To make up for the lost business, the restaurant has leaned on corporate events on slow weeknights and has clawed back around 90% of pre-pandemic revenue. But even those events get dinged by the hybrid workweek: At parties where employers invite 300 attendees, only about half will show up, Cohen said.

And Sweetgreen, a salad chain ubiquitous with New York City’s fleece-vest set, said the start and end of the week used to be its strongest sales days, but “Mondays and Fridays are definitely not the same,” said Sweetgreen co-founder and CEO Jonathan Neman, on a November earnings call.

On a Monday in October at a Bryant Park Sweetgreen known for lines stretching down the block on busy days, office workers in button-down shirts and high heels breezed in and out with $15 salads in hand.

“That was surprisingly easy,” a woman leaving the salad counter said to her companion.

“Yeah, it doesn’t feel like a madhouse in there, which is weird,” he replied.

Bloomberg found the longest wait for a salad at the Bryant Park Sweetgreen at noon was around 13.5 minutes on a Wednesday. By contrast, it took only four minutes to breeze through the line on a Friday.

Sweetgreen is now renegotiating leases with landlords to structure rent as a percentage of sales, versus a fixed amount common with commercial rents.

With offices emptier on Mondays and Fridays, business travelers are cutting hotel stays short by a day or two and flying in just for midweek, said Vijay Dandapani, president and CEO of the Hotel Association of New York City.

Business travel has rebounded the most in places like Austin, Texas, and Charlotte, North Carolina, where workers are back in physical offices, according to hospitality data and analytics firm STR. In Austin, hotels recovered to 92% of pre-pandemic occupancy on Mondays of last year, while New York hotels were only around 83% recovered, and San Francisco was even further behind, at 74%.

Resistance to coming into the office at the end of the week runs so deep that when a large financial company rented out a Fitzpatrick Hotel Group bar in Midtown Manhattan on a Friday evening, only about a third of the 130 invited employees showed up, said John Fitzpatrick, who owns the company's two New York City hotels.

“To lose that amount of business on a Friday, which is one of your busiest days, is huge,” said Fitzpatrick, who depends on business travelers for 70% of his clientele.

To drum up business, he’s considering raffling a free trip to Ireland to Friday bar customers. Another marketing idea is to encourage tourists to extend their New York City holidays by promoting the hotel as a remote-work haven on Fridays.

“We have to come up with something,” Fitzpatrick said.

—With Alexander Cohen, Christian Richey and Natalie Wong