Wall Street's return to work is saving NYC while Big Tech is letting Silicon Valley empty out
- Differences in the
New Yorkand Bay Area back-to-work strategies are hitting the big cities' economies.
- Wall Street's return-to-work orders powered an early commercial real-estate comeback and revived downtown neighborhoods.
- Tech giants in the Bay Area have delayed in-office work, leading to a slower recovery and huge exits.
The east coast and west coast have long had a rivalry, but their diverging responses to economic reopening are painting a new chapter: New York City is reviving fast and
In New York City, finance giants' urges to return to
The commercial real-estate comeback is geographically uneven, along with the economic comebacks for the two most expensive American cities.
The gap between both metropolitan centers is already wide. Interest from prospective office tenants in New York rebounded to 98% of the city's pre-crisis average in June, Bloomberg reported, citing data from property data company VTS. Demand in San Francisco, however, is just 68% of its pre-pandemic average, signaling the tech sector's relaxed stance on telecommuting places a major drag on the city's office market.
That matters beyond the bottom line for leasing firms. Greater clarity around return-to-office plans is likely powering stronger apartment demand in New York, landlord Equity Residential said in a recent earnings call.
The situation is "a little more ambiguous" in San Francisco, Equity Residential added. Uncertainty around work plans and the Delta variant of COVID-19 will "likely lead to a delayed leasing season" and a slower recovery to pre-pandemic occupancy, the company said.
More broadly, the two cities' approaches could be fueling vastly different labor-market recoveries. New York had recovered 45% of its lost jobs by the end of June despite suffering the most at the start of the pandemic, Oxford Economics said in a note. By comparison, San Francisco only recouped 28% of its lost payrolls.
To be sure, countless other factors play into each city's jobs recovery. But other data suggests the tech sector's approach isn't just delaying returns, but contributing to a months-long exodus from downtown areas.
Occupancy change in San Francisco was flat in May and June,
Meanwhile, mail-forwarding data suggests New York City is on its way to pre-crisis occupancy. Manhattan, which saw the largest decline in population, gained occupants on net in May and June, according to Jefferies. All indications "point to further acceleration in July," and the pick-up is likely linked to Wall Street's strict return-to-office policies, the team led by Jonathan Petersen said.
A similarly strict policy on the Bay Area could revive office use, but a shift in occupancy could pose permanent issues for the region's landlords.
And where the San Francisco area saw the largest drop in population since March 2020, Sun Belt cities picked up much of the slack. Occupancy in Raleigh, Tampa, Jacksonville, and Charlotte shot higher over the crisis.
Should those moves turn permanent, it could simply be too late for the Bay Area to recoup all of its pre-pandemic workers.
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