The Empire State Building has been a symbol of American economic power for nearly 90 years. Recently, she has also become a symbol of her struggle with coronavirus.
102 story crowded once from an 1,454 sq ft art deco skyscraper mostly empty in a city in shock of the worst country outbreak of COVID-19. The red tower lit with red and white flashes to honor emergency workers, sirens in downtown Manhattan.
A week after the second stage of the reopening of New York City, dozens of companies with office space in one of the most famous buildings in the world are trying to figure out when and how – even if – they will return.
The dilemma itself is being played across the United States and the world. Something as natural as working in a large office building has suddenly become unimaginable for many.
The June 22 reopening of office buildings allowed to invite tenants again, as long as the maximum occupancy remained less than 50 percent. But most companies headquartered in the Empire State Building, including big names like LinkedIn and Bulova as well as the global non-profit fund, have chosen to extend home-based work arrangements.
According to a survey by tenants, the administration expects that only 15 to 20 percent of the usual building’s 15,000 workers will return in the second stage of the reopening.
However, even among those who plan to maintain their presence when the time comes, few expect to return to a workplace like the one they knew before Coronavirus, according to Reuters interviews with many people who work or run companies there.
The global brand group, which owns the likes of Calvin Klein, signed a 15-year lease for six floors of office space in 2011, but has already told employees working in New York that they will never be asked to return to the office.
Rick Darling, CEO of the apparel and marketing company, told Reuters that the attractiveness of working in “incredible corporate headquarters” had been overshadowed by the epidemic.
He said, “I think it becomes less important.” “If your people are scattered, then your company’s true performance becomes a prestigious one.”
Darling said the company had not yet made any decisions about office space and would need showrooms to launch fashion.
Such changing situations can cause problems for the Empire State Realty Trust, which owns and operates the building, as well as for other major commercial real estate companies throughout the city and outside.
Daniel Ismail, chief analyst at Green Street Advisors, said the value of office property in New York City was likely down 10 percent during the epidemic.
Empire State Realty shares have fallen about 53 percent since the end of 2019, compared to a 25 percent drop this year in the FTSE Nareit Equity Office, which tracks office real estate investment trusts (REITs).
Ismail cited stress factors in the company, including the COVID-19 shutdown of the Empire State Building Observatory – a tourist attraction last year that produced more than a fifth of the group’s revenue, which also has office space and other stores across the city.
Nevertheless, CEO Anthony Malkin remains optimistic.
His family has been involved in the Empire State Building since the 1960s, and he is convinced that his status as a flashy piece on the New York skyline will perpetuate the temporary, if painful, effect of the coronavirus.
“Since COVID, we’ve had just people signing leases – we didn’t have anyone coming out,” said owners in an interview, noting that Starbucks signed a three-story lease on March 15. “The vaccine, the herd immunologist, will return to the way it was.”
Empire State Realty withdrew $ 550 million in renewable credit facilities in the first quarter to ensure that it would have cash on hand if tenants defaulted, but so far it has received the bulk of the fees.
The rents offer in April dropped to 73 percent at first but rebounded to 83 percent by June 1, according to an investor offer. The company offered to postpone a small portion of the tenants, which helped keep the overall occupancy rate stable at around 96 percent.
Some tenants say they do not intend to leave.
For example, Shutterstock, who signed an 11-year lease in 2013, follows orders from authorities about when and how to return, said Heidi Garfield, the company’s general counsel and interim human resources chief.
The creative content platform has 85,000 square feet, with an open layout that includes a large café, library, balcony, exercise studio and lounge areas. Before the coronavirus infection, Garfield said, the main graves of staff were when cold coffee faucets or kombucha fell.
Officials from smaller, nonprofit tenants such as Human Rights Watch and Human Rights Watch said the building lends credibility to potential donors and partners, regardless of where the employees work.
“Being in the Empire State Building was a strong component of our reputation,” said Thor Halvorsen, president of the Human Rights Foundation. “People immediately assume that you are a solvent, that you are real, and that you are speaking.”
But other tenants are less confident. Not sure what the future of work might look like, they wondered if it made sense to spend big money on office space when the remote operations were working well.
The company cost $ 65.19 per square foot on average to rent space in one of Empire Empire Realty’s Manhattan buildings before COVID-19, according to the company, compared to an average of $ 81.64 in Manhattan as of late May, according to American real estate company CBRE.
Nicole Laruso, director of CBRE, said prices did not change much during the epidemic because of a few new listings, adding that the reopening process could see “more pricing review”.
Visitors to the Empire State Building immediately face the new reality.
Malkin said that anyone who enters the building must wear a mask and carry a hand sanitizer.
Tenants said the administration closed unnecessary entrances and modified retail space in the basement as stations for temperature checks and sterilization. In the elevator hall there are stickers on the floor on which to stand and wait to ensure social exclusion.
Similar stickers line the sidewalks outside the main entrance, in preparation for the reopening of its observatory next month. The attraction, which allows visitors to take pictures at the top of the building, generated revenues of over $ 125 million for the company last year.
Some companies are revaluing lease contracts.
This month, for example, Coty Beauty Products Corporation signed an area of 50,000 square feet of Empire State Building space to LinkedIn, owned by Microsoft.
Expedia Group, which occupies 9,000 square feet on the seventy-second floor, said it had postponed “several real estate capital projects” to maintain liquidity.
Coty, Expedia, and LinkedIn representatives did not respond to multiple requests for comment.
Even after the epidemic is over, the office market is likely to remain irreversibly changing, according to Ismail Street analyst Green Street Advisors.
“Big companies have found an increasing level of comfort with people working from home, which I think will likely accelerate in the future.”