[Real Beat] Cities Empty on Mondays and Fridays... Those Struggling to Make a Living

How Changes in the Workplace Have Transformed Cities③

Editor's Note[Jjinbit] is a shortened form of 'Jung Hyunjin's Business Trend' and 'Real Business Trend,' a segment that showcases trends in changes in work.

[Asia Economy Reporter Jung Hyunjin] "Although New York City in the United States is rushing to return to the office, the atmosphere on Fridays and Mondays is different. The subway is empty, salad shop lines are short, and bars have plenty of seats available."

The COVID-19 pandemic has changed the working styles of American companies, leaving downtown areas deserted. The number of days office workers commute daily has significantly decreased, reducing related consumption, causing nearby small business owners to frown due to fewer customers. With the decline in office demand, taxes related to commercial real estate have decreased, deepening the concerns of major U.S. city mayors.

[Image source=Reuters Yonhap News]

◆ $15 Trillion Lost in Manhattan's Annual Consumption

On the 12th (local time), Bloomberg News reported in an article titled "Remote work is costing Manhattan over $12 billion annually (about 15.3 trillion KRW)" that "Nowhere else besides New York shows such a clear economic cost of remote work in terms of consumption."

According to data from the research group WFH Research analyzed by Bloomberg, the number of office commuting days for Manhattan workers decreased by 30% annually, resulting in at least a $12.4 billion drop in consumption near workplaces. This calculation is based on the 2019 U.S. Census Bureau data on consumption per worker among 27 million Manhattan commuters and residents.

The average decrease in spending per office worker near offices in New York was $4,661. San Francisco was analyzed at $3,040, and Chicago at $2,387.

When office workers commute, they naturally spend money on meals or coffee nearby. The slower the return of remote workers to the office, the more consumption decreases. Especially on Mondays and Fridays, when office attendance sharply declined, consumption dropped significantly. Bloomberg reported that this change is noticeable in areas with long commutes and a high proportion of office workers.

[Image source=Reuters Yonhap News]

Bloomberg conveyed the atmosphere, saying, "Although New York has experienced economic shocks like the 9/11 attacks and the 2008 financial crisis, small business owners are struggling to adapt to the new three-day workweek."

Emad Ahmed (57), who has run a food truck near Wall Street for 30 years, told Bloomberg that the current foot traffic near Wall Street is the worst since he started working. He said that sales on Mondays and Fridays are only about 30% of pre-COVID-19 levels, and on other days, sales recover to about 60% only when the weather is good.

Jordan Cohen, who runs a restaurant in central Manhattan, said that although weekday evening corporate events have helped recover up to 90% of pre-pandemic revenue, the spread of hybrid work?mixing office attendance and remote work?has halved corporate event attendance compared to before.

◆ Impact on City Finances... Public Transportation Also 'Suffering'

The spread of remote work has lowered commercial real estate values, making financial situations difficult not only for small business owners but also for cities and local governments that collect property and real estate taxes. According to a report released in November 2021 by the Institute on Taxation and Economic Policy (ITEP), researched by Howard Chernick, an emeritus professor at the City University of New York, and others, property taxes from commercial real estate account for an average of 37% of total taxes in eight major U.S. cities including New York, San Francisco, and Chicago.

New York Mayor Eric Adams said in February last year, "You can't stay home all day in pajamas," urging a return to the office. However, as office returns slowed, he announced plans in the second half of last year and early this year to convert vacant office spaces downtown into residential areas.

[Image source=AP Yonhap News]

San Francisco Mayor London Breed recently projected a $728 million tax revenue loss over the next two fiscal years. Commercial real estate-related tax revenue accounts for about 20% of San Francisco's total tax revenue. Mayor Breed said, "It has been tough for years and remains difficult," adding, "We must accept that the downtown we once knew will never return."

Washington D.C. Mayor Muriel Bowser has repeatedly requested President Joe Biden this year to end remote work for federal employees to support the city’s economy. Mayor Bowser, a Democrat, emphasized the need for federal employees to return to the office to prevent downtown from declining with store closures and falling real estate prices. She added that the federal government occupies a quarter of Washington D.C.'s jobs and one-third of its office space.

Public transportation has also inevitably suffered revenue losses due to decreased ridership. Bloomberg reported that New York City's weekday public transit ridership in January recovered to 64% of pre-COVID-19 levels. If the current trend continues, annual losses exceeding $2 billion are expected by 2026. As the situation worsens, New York City's transit authority is reportedly considering reducing subway service on some lines with low ridership on Mondays and Fridays.