To understand the steep road to recovery, focus on one number: $928. That’s the average price per square foot that investors were willing to pay for shares in the city’s publicly traded landlords over the three years before the pandemic.
Today, the implied per-square-foot value of Empire State Realty Trust is just $436, according to a report on Thursday from brokerage firm Evercore ISI. The price is $516 per square foot for Vornado shares and $572 for SL Green.
For context, in 2009 the implied price of Manhattan office space was $469, Evercore said.
Empire State Realty is trading below 2009 levels because it gets a big slug of revenue from tourists paying $42 and up to visit its observation decks.
Grim as this is, in the summer of 2020 prospects for Manhattan real estate looked even worse. In June the implied price of Empire State Realty was just $266 per square foot; the implied price of Vornado was $364.
It has become clear that many workers who once filled office towers will work from home, at least some of the time, for a long time to come. On Wednesday the CEO of American Express said it was unlikely all employees would return to the office.
Big tenants such as JPMorgan Chase, Bank of New York Mellon and Wells Fargo shrank their footprints in 2020. Interpublic Group, an advertising holding company, tore up leases on 1.7 million square feet of space, a 15% reduction globally.
That said, newcomers to the city such as Facebook and Amazon have signed up for big offices. Bargain hunters might fill up vacant spaces after they figure out how many people will be in them. The city has a lot going for it, starting with bagels, no matter what culinary provocateurs may say.
And working from home is no picnic, especially with children in the household. I have never felt so fed up and exhausted. But there are things about commuting life I don’t miss, such as squeezing myself into a delayed subway car.
I’ve been working at my living room table for exactly one year. I could continue, though I would prefer not to. Probably many white-collar workers in my situation have made the same peace with things.
That mental accommodation translates directly into the depressed cost of office space. The price investors once paid of $928 per square foot feels every passing day like no more than a dream remembered, a civilization gone with the wind.