october12–25, 2020 | newyork 31
duringthe 2008 financialcrisis.
“It’s phenomenal how much companies
can spend on their real estate,” says Joel
Steinhaus, a former executive at Citigroup
and WeWork. In New York, according to
one study, businesses may allocate as much
as $25,000 a year per employee for space.
What could be taking shape is a system in
which desks are optional perks that compa-
nies offer to their employees, rather than
entitlements that come with a job. The New
York technology entrepreneur Kevin Ryan,
speaking by phone from a vacation home in
France, tells me that at the height of the
city’s lockdown, he closed an acquisition
without one in-person meeting. (Ironically,
the company in question was Meetup.)
Already, two of the start-ups in his portfolio
have given up their office leases in Manhat-
tan. “There is zero question that the
demand for commercial real estate is going
to go down, and prices are going to go down
dramatically,” Ryan says. “They are kidding
themselves if they think it’s not going to be
devastating. Devastating.”
The longer the pandemic goes on, the
more tenants will have a chance to reassess
their need for expensive office space. Little
wonder, then, that as soon as the infection
rates stabilized, prominent landlords
began urging their tenants to come back to
the office. In August, Jeff Blau, the chief
executive of Related, wrote a Wall Street
Journal column saying that companies
had an “obligation” to return to work. “The
entire essence of this city we all love is at
stake,” he wrote.
“This is really not a real-estate issue, quite
honestly,” Blau told me. “People who think
they’re going to hang out wherever they
are—in Connecticut at their parents’ house,
in the Hamptons, or wherever—are going to
come back in a year expecting to find every-
thing just waiting for them and are going to
be in for a real surprise. Because businesses
are not going to make it unless they come
back now. Their civic responsibility is to
make sure that New York is here.”
Office occupancy at Hudson Yards
remains stuck around 10 percent. For
now, its major corporate tenants are still
payingtheirrent,andBlausaidthingsliv-
ened up after Labor Day, when the mall
and the Vessel reopened. He contends that
even the bankruptcy of Neiman Marcus
had an upside. “This was over ten years
ago when we planned the retail, and it was
a different world,” he told me. Department
stores are a dying business, but the open
Neiman floor plan, with its terraces and
escalators, appeals to the pandemic-era
desire for sun and ventilation. Related is
now marketing the 380,000-square-foot
space to office tenants.
In an effort to lead by example, many
real-estate companies masked up and went
back to their offices as soon as Governor
Cuomo lifted lockdown restrictions in late
June. To assuage office workers’ fears,
Related installed new building technolo-
gies, such as lobby temperature sensors. At
Hudson Yards, people can summon eleva-
tors with a cell-phone app, so they don’t
even have to touch buttons.
Other commercial landlords have been
working with their tenants to provide
covid-attuned perks. Tishman Speyer
Properties, which owns most of Rockefeller
Center, has turned the plaza’s ice-skating
rink into an outdoor dining area with food
from restaurants like the acclaimed brasse-
rie Frenchette. Some landlords are explor-
ing offering day-care services that can
supervise employees’ children as theygo
through their school day on Zoom.
“People have to get past the pointwhere
there’s a zero risk tolerance,” saysScott
Rechler, the chief executive of RXRRealty,
which owns some 25 million squarefeetof
office space in the New York region. Rechler
says about 90 percent of his company’s
employees have returned to its headquarters
under strict protocols enforced via technol-
ogy. Facial- recognition software allows
lobby cameras to monitor whether people
are wearing masks and even whether they
are pulled down below the nose. Employee
badges track the locations of workers to
make sure they keep at least six feet apart.
“This is the new abnormal,” Rechler says.
But few corporate executives seem to
believe it is their civic responsibility to
occupy the very expensive square footage
they are paying rent on, especially if it
comes at the additional cost of creating
strife in their workforce. Among other
things, they have to consider their liability
if there is an outbreak within their offices.
Not every landlord will invest in fancy gad-
gets, and not every skyscraper can be retro-
fitted. A large percentage of New York’s
building stock dates back 50 or even 100
years, with cramped elevators and untrust-
worthy ventilation.
A few investment banks startedto sum-
montradersbackafterLaborDay, includ-
ing JPMorgan, news that inspired a con-
gratulatory tweet from DonaldTrump.
Four days later, reports emerged that the
firm had sent some employees home again
after a worker tested positive. (Not long
after that, so did Trump.) Everyonewanted
New York to get back to work, butwishing
wouldn’t make it so. No one—not the presi-
dent, not Congress, not the mayor or the
governor, not the real-estate industry or its
increasingly emboldened critics—seemed
to be devising a plan to rescue it.
“There is a sense that we are in a cauldron
right now,” Spitzer said, “without a leader-
ship group.”
ew york has beenin the
cauldron before, thoughour col-
lective memory of it has faded.
We are now as separated in time
from the urban catastrophe of
the 1970s as that city was from
Fiorello La Guardia and the
Great Depression. So it is useful
to be reminded what thebottom
really looks like. Exodus? The
population shrank by around a
million residents during the
1970s, leaving entire neighborhoods deso-
late. Blight? There were 6,000 fires a year
reported in Bushwick, many of them ar-
sons commissioned by landlordsfor the
purpose of collecting insurance. Deficits?
In inflation- adjusted dollars, the city’s total
bond and pension debt reached nearly
$100 billion in the mid-1970s, and banks
would no longer lend it money.
Back then, the real-estate families orga-
nized to save the city’s government—and
their own financial interests—by prepaying
a huge chunk of property taxes, helping to
stave off municipal bankruptcy. The gover-
nor appointed an investment banker named
Felix Rohatyn to work out the city’s bond
debt—it’s still being paid off—andcreated
the Financial Control Board, whichwrested
authority over the budget from the mayor.
Ineffective elected officials were supplanted
by an elite group of corporate and civic lead-
ers, a cadre the Village Voice journalist Jack
“WHAT’S WRONG WITH BUILDING
A BUILDING? WHERE DID THIS CITY
COME FROM?”
