“It’s Time To Get Back To The Office”

“Let’s set a New Year’s resolution right now: The days after New Year’s Eve, we say, ‘Everybody’s back in the office,’” New York Gov. Kathy Hochul recently declared. “You can have flex-time, but we need you back the majority of the week.’”

Hochul made the comments two weeks ago at a “power breakfast” organized by the Association for a Better New York (ABNY), a nonprofit whose board members include several prominent commercial real estate executives.

It didn’t seem to matter that COVID-19 cases were on the upswing statewide, along with hospitalizations. As Hochul had noted on Twitter earlier that morning, “Offices are still too empty and too many workers are at home — that has an impact on our economy and ripples across the entire city. I’m putting a stake in the ground: It’s time to get back to the office.”

Late last week, Hochul declared a state of emergency over the continued spread of Delta and the newly-identified Omicron variant making its way around the globe. And on Monday, she warned New Yorkers to prepare for Omicron, noting on Twitter, “It’s not a question of if it comes to New York, but when.” Hochul used the development to allow the state to postpone non-essential surgeries to preserve hospital capacities and to encourage people to get vaccinated. But she did not reverse her pledge to get everyone back to the office a month from now.

Hochul wasn’t always so eager to end remote work. In April 2020, during a webinar hosted by the Greater Rochester Chamber of Commerce, she called working from home an “opportunity for businesses” and the “new normal.” And as recently as September, she was pushing for remote options. One of her first actions as interim governor was signing legislation that expanded virtual public meetings across the state to enable New Yorkers to “participate safely in the political process.”

“Let’s be clear — the COVID-19 pandemic is not over,” she said at the time.

That reality hasn’t changed, but on a political level, Hochul has found herself facing a competitive primary for governor, with New York Attorney General Letitia James entering the race. Now, Hochul will need all the support she can get from commercial real estate interests that are threatened by traditional office workers laboring from the comfort and safety of their homes.

The real estate industry, which has supported Hochul in the past to the tune of more than $300,000 when she was former Gov. Andrew Cuomo’s second in command, previously fueled her old boss’s campaigns with more than $20 million in donations and has been one of the state Democratic party’s top donor industries. Since 2016, it has given the party roughly $420,000.

“Build Back New York!”

Since the start of the pandemic, the number of New Yorkers working remotely has increased dramatically, hitting the commercial real estate hard.

A November survey from the Partnership for New York City, a group representing big business interests, found that as of the end of October, just 28 percent of Manhattan office workers were at their workplace on an average weekday, while a mere eight percent were there five days a week. The majority of office workers — 54 percent — were still working fully remote.

The Partnership for New York City survey noted that one-third of employers expected their office space needs to decline over the next five years. Another recent study by the Institute on Taxation and Economic Policy (ITEP) found that current trends suggest that demand for commercial real estate space could soon drop as much as 25 percent, leading to a decline in city tax revenues. The report notes that 80 percent or more of jobs in key industries in cities are potentially remote-capable.

As Howard Chernick, lead author of the ITEP report, put it, “This shift will have tangible repercussions for commercial real estate occupancy rates and values, especially as some employers consider a permanent or partial shift to a remote work model.”

Still another report by New York State Comptroller Thomas DiNapoli estimated that for Fiscal Year 2022, the COVID pandemic had cost New York City’s office sector $28.6 billion in market value and over $850 million in property taxes. According to that report, in the second quarter of 2021, asking rents were down 4.2 percent from the previous year, while vacancy rates had hit 18.3 percent, their highest amount in more than three decades.

No wonder, then, that business groups like the Greater New York Chamber of Commerce have opposed the continuation of the remote economy, citing the impacts on city businesses.

“Build back New York!” Helana Natt, the group’s executive director, told The Daily Poster when asked about the push to get workers back into offices. “We’re 100 percent behind building back New York… getting tourism back, getting the major corporations back — it’s a domino effect: Everyone’s back in New York City spending money and it will get the economy back up.”

“A New Era Of Transparency”

Hochul came into office in late August promising “a new era of transparency” for New York. Her predecessor, Cuomo, had been forced out of the governor’s office following a series of scandals, one of which included covering up deaths that resulted from his decision to send COVID patients to nursing homes at the height of the pandemic’s first wave.

In his annual budget, the former governor had inserted a provision shielding nursing home and hospital executives from civil and criminal liability for COVID-related deaths and injuries. The move followed more than $1 million in donations from the Greater New York Hospital Association to the state Democratic party. Cuomo faced accusations that he’d rewarded powerful industry donors at the expense of vulnerable New York populations.

Hochul’s position on getting people back into the office could make her a target of similar accusations — such as that she is doing the bidding of  donors in the commercial real estate space.

“It certainly doesn’t make public health sense,” said Michael Kink, executive director of the progressive advocacy group Strong Economy For All Coalition. “The only people that want every single person to go back to office buildings are real estate billionaires that own office buildings.”

Kink believes those wealthy interests are now funding Hochul’s gubernatorial campaign. “Kathy Hochul has raised over $10 million, she says, in like two-and-a-half months,” he said. “You don’t raise $10 million that fast from grandmothers in Lackawanna. You raise it from the billionaires who backed Andrew Cuomo.”

The filings for Hochul’s recent impressive fundraising haul are not yet available, which means her donors’ backgrounds are still unknown. However, of the more than $4 million she received between 2015 and July 11, 2021, roughly $300,000 came from real estate interests. Commercial real estate donors in particular have been some of her most prolific supporters.

On January 8, 2021, for example, Hochul accepted a set of $22,600 donations from 345 Park Ave LP, which operates non-residential buildings, and Rella Fogliano, the chief executive of real estate development company MacQuesten Construction, which builds both residential and commercial buildings. She also received an $11,000 donation from Douglas Jemal, the founder of Douglas Development, which develops office, retail, and residential buildings.

On July 8, 2021, Hochul accepted $18,000 from William Rudin, the CEO of the Rudin Management Company. Rudin is also the former chairman of the Real Estate Board of New York (REBNY), a lobbying group for the New York City’s real estate industry, and a board member for ABNY. According to Rudin’s member page on the REBNY’s website,  he “oversees the Rudin real estate portfolio of 16 office towers comprising more than 10 million square feet of Class A space.”

Two days later, Hochul received an additional $10,000 from Samuel Savarino, the founder of Savarino Companies. According to the company’s website, the company deals with “all aspects of construction, development, and property management to handle just about any commercial, multifamily, hospitality or institutional project.”

It’s not clear yet whether real estate executives will rally behind any one Democratic candidate for governor. In her campaign for Attorney General, James raised nearly $370,000 from real estate interests, possibly adding pressure on Hochul to shore up her own support from the industry.  

Even as Hochul has been calling for a return to offices in New York, the interim governor has also praised Erie County officials for reinstating a mask mandate amid an outbreak that saw COVID cases double in the region in four weeks — an increase that is echoing statewide trends.

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