May 30, 2022

N.Y.C. Companies Are Opening Offices Where Their Workers Live: Brooklyn

Before the pandemic, Maz Karimian’s commute to Lower Manhattan was like that of many New Yorkers’: an often miserable 30-minute journey on two subway lines that were usually crammed or delayed.

By comparison, when he returned to the office last week for the first time since the coronavirus began sweeping through the city, his commute felt serene: a leisurely bicycle ride from his home in Carroll Gardens to his company’s relocated office about 10 minutes away in Dumbo.

“I love the subway and think it’s a terrific transit system but candidly, if I can be in fresh air versus shared, enclosed air, I’ll choose that 10 times out of 10,” said Mr. Karimian, the principal strategist at ustwo, a digital design studio.

More than 26 months after the pandemic sparked a mass exodus from New York City office buildings, and after many firms announced and then shelved return-to-office plans, employees are finally starting to trickle back to their desks. But remote work has fundamentally reshaped the way people work and diminished the dominance of the corporate workplace.

Companies have adapted. Conference rooms got a makeover. Personal desks became hot desks, open to anyone on a first-come basis. Managers embraced flexible work arrangements, letting employees decide when they want to work in person.

And some are taking more drastic measures to make the return to work appealing: picking up their offices and relocating them closer to where their employees live. In New York City, the moves reflect an effort by organizations to reduce a major barrier to getting to work — the commute — just as they start to call their workers back.

Before the pandemic, workers in New York City had the longest one-way commute on average in the country, nearly 38 minutes.

About two-thirds of ustwo’s employees live in Brooklyn, so it made sense to move the office to Dumbo, on the Brooklyn waterfront, after a decade in the Financial District in Manhattan, said Gabriel Marquez, its managing director.

The new space is about 11,500 square feet, slightly smaller than its former office, and was less expensive per square foot to lease than most offices in Manhattan. It is also better suited for when employees do come into the office, featuring an open-air rooftop with Wi-Fi for meetings, he said.

“We didn’t need the same relationship with the office and have everyone in five days a week,” said Mr. Marquez, who said that employees are mandated to be there twice a week, on Tuesdays and Wednesdays. “It felt like, culturally, it is a good fit and for a lot of companies like ours in our area.”

Maz Karimian, who works at ustwo Photo Credit: Jose A. Alvarado Jr. for The New York Times

Before the pandemic, the morning commute for Maz Karimian, who works at ustwo, took about 30 minutes on two separate subway lines into Manhattan. Now, his company’s new office in Brooklyn is within biking and walking distance from his home.

As New York City tries to climb out from the depths of economic turmoil, there are recent signs that the city is rebounding despite concerns about crime on the subways and rising coronavirus cases. Tourists are visiting New York at a greater rate than last year, hotel occupancy has increased and earlier this month, daily subway ridership set a pandemic-era record of 3.53 million passengers.

Despite those promising signals, a vital piece of the city’s economy remains battered: office buildings.

Before the pandemic, office towers sustained an entire ecosystem of coffee shops, retailers and restaurants. Without that same rush of people, thousands of businesses have closed and for-lease signs still hang in many storefronts.

Despite pleas for months from Mayor Eric Adams and Gov. Kathy Hochul for companies to require people return to the office, so far, many have heeded demands by their employees to maintain much of the job flexibility that they have come to enjoy during the pandemic.

Just 8 percent of Manhattan office workers were in-person five days a week from the end of April to early May, according to a survey from the Partnership for New York City, a business group.

About 78 percent of the 160 major employers surveyed said they have adopted hybrid remote and in-person arrangements, up from 6 percent before the pandemic. Most workers plan to come into the office just a few days a week, the group said.

The seismic shift in office building usage has been one of the most challenging situations in decades for New York real estate, a bedrock industry for the city, and has upended the vast stock of offices in Manhattan, home to the two largest business districts in the country, the Financial District and Midtown.

About 19 percent of office space in Manhattan is vacant, the equivalent of 30 Empire State Buildings. That rate is up from about 12 percent before the pandemic, according to Newmark, a real estate firm. Office buildings have been more stable in Brooklyn, where the vacancy rate is also about 19 percent but has not fluctuated much since before the pandemic, Newmark said.

Daniel Ismail, the lead office analyst at Green Street, a commercial real estate research firm, predicted that the office market in Manhattan would worsen in the coming years as companies adjusted their work arrangements and as leases that were signed years ago started to expire. In general, companies that have kept offices have downsized, realizing they do not need as much space, while others have relocated to newer or renovated buildings with better amenities in transit-rich areas, he said.

Even before the pandemic, it was not uncommon for companies to move offices throughout the city or to open separate locations outside of Manhattan. The city offers a tax incentive for businesses that relocate to an outer borough, with up to $3,000 in annual business-income tax credits per employee.

Nearly 200 companies received it in 2018, for a total of $27 million in tax credits, the most recent data available, according to the city’s Department of Finance. But some office developers are betting on neighborhoods outside Manhattan becoming attractive in their own right, luring companies that specifically want to avoid the hustle-and-bustle of Midtown.

More than 1.5 million square feet of office space is under construction in Brooklyn, including a 24-story commercial building in Downtown Brooklyn.

Two Trees Management, the real estate development company that transformed Dumbo, is turning the former Domino Sugar Refinery in Williamsburg into a 460,000-square-foot office building. Jed Walentas, its chief executive, said he had so much confidence in the project that it was being renovated on speculation, without office tenants lined up beforehand.

“You can’t ignore the talent base that has shifted to Brooklyn and Queens,” Mr. Walentas said. “The notion that they will all take the F train or the L train or whatever train into the middle of Manhattan, that’s faulty.”

00ny-office3-superJumbo Photo Credit: Jose A. Alvarado Jr. for The New York Times

“We didn’t need the same relationship with the office and have everyone in five days a week,” said Gabriel Marquez, the managing director at ustwo, which moved to the Dumbo neighborhood in Brooklyn.

To be sure, the latest outer-borough office trend is still nascent, and the unpredictable whims of the pandemic could change its course in the future.

Brian R. Steinwurtzel, the co-chief executive at GFP Real Estate, whose firm largely owns properties in Manhattan, said that office markets in Queens and Brooklyn could attract certain niches of companies, such as biomedical and life science companies in Long Island City, Queens, where GFP has several sites.

But overall, Mr. Steinwurtzel offered a curt assessment of the outer-borough markets: “It’s terrible.”

Still, just being able to have panoramic views of Manhattan is enough for some companies.

When the European advertising firm Social Chain opened an office in the United States before the pandemic, the group settled in the Flatiron area, an epicenter of the marketing world made famous decades ago by advertising giants on Madison Avenue.

But after the pandemic struck and the firm decided to revisit its location, the prestige of being in Manhattan lacked the same magnetism — or necessity, said Stefani Stamatiou, the managing director of Social Chain USA.

She toured office locations in Manhattan but none felt like the right fit. Then she traveled across the East River into Williamsburg and found 10 Grand Street, also a Two Trees property. It checked all the boxes — unobstructed views of Manhattan, a flexible floor plan and, most importantly, a shorter commute for a large number of Social Chain’s 42 employees.

That includes Ms. Stamatiou, who now walks to work from her home in Greenpoint.

“There is actual outside activities and restaurants down below us just like in Manhattan but there’s a sense of space,” Ms. Stamatiou said. “It made sense to be where the creative is, where the people are.”