Back in business
Returning employees are filling city bldgs.
REALTY CHECK
THERE’S good news for Manhattan office landlords: Physical building occupancy rose to 46.6% for the seven-day period ending Sept. 14, according to the much-followed Kastle Systems Back-to-Work Barometer.
The post-Labor Day jump was a huge increase over Kastle’s tally of 38% from the previous week — and a quantum leap over the low 20s last winter.
But the news might be even better than that. Although Kastle is widely cited as the oracle of office occupancy, its data are less inclusive than most market-watchers are aware. Because of that, the number of employees back at their desks despite work-from-home and hybrid schedules is probably higher than Kastle’s data suggest.
The sample of buildings where the security provider counts entry swipes doesn’t include many of the city’s largest real estate empires, where tenants include more banks and financial-services firms than the city average. The Wall Street firms have more employees at their desks than tech, creative and media firms.
Given the Kastle Barometer’s visibility — Realty Check has often cited its findings like the rest of the real estate media — it’s hardly unfair to note what the survey leaves out.
Kastle doesn’t cover properties owned or managed by Rudin Management, Silverstein Properties, Tishman Speyer, BXP (formerly Boston Properties) and Related Cos., according to their representatives. Of 40 Manhattan locations with over 34 million square feet owned or managed by the city’s largest commercial landlord, SL Green, Kastle is present at only one recently acquired property.
Empire State Realty Trust doesn’t use Kastle at the Empire State Building or at most of its other large towers. The Durst Organization uses Kastle in nine buildings, but not in its two largest, One World Trade Center and One Bryant Park.
Kastle estimate rises
Until last week, Kastle’s estimate of New York City office use hovered in the 30% to low-40% range. But its latest tally of 46.6% brought it closer to the 49% estimate last week by the Partnership for New York City. The partnership’s data are based on estimates provided by 160 major employers.
Partnership President Kathryn Wylde, while noting that her organization’s findings “have been only a couple points off from Kastle through the pandemic,” said, “Our membership mix may obviously differ from theirs. We are heavy on financial services, which is more present in the office than technology, for example.”
Despite Kastle’s previous gloomy weekly snapshots, August saw more Manhattan leasing volume than in any month since the pandemic began. The boom spilled into September, with a nearly 140,000-square-foot deal for Blue Owl Capital at the Seagram Building.
If Big Apple offices are as lonely as Kastle suggested, why do very smart companies continue to sign leases?
There’s a second possible fudge factor as well. Kastle counts not the central business districts of 10 US cities, but their “metro areas.” It turns out the “NYC Metro” includes suburbs far beyond the Big Apple.
We asked the Partnership for New
York City why its numbers last week were 11 percentage points higher than Kastle’s. One reason was that the two organizations’ measuring periods didn’t exactly coincide (the Partnership’s survey was based on employers’ estimates between Aug. 29-Sept. 12, while Kastle reported only the week ending Sept. 7).
But when the partnership asked Kastle to clarify its sample, the security firm told it that it defines New York Metro “as the broader core-based statistical area, which includes Long Island, Westchester and other counties in New York, in addition to parts of New Jersey and Pennsylvania.”
When The Post asked Kastle representative Audrey Chang to confirm its sample included suburbs, she said in an e-mail, “Yes, although the focus is on Manhattan Class-A . . . based on trending details from more than 200 buildings in New York City.” Citing client confidentiality, Chang wouldn’t say which locations it does or doesn’t include in its data. CBRE tristate CEO Mary Ann Tighe said, “Of all the data, I think the partnership’s are the most reliable because its members are a cross-section of the city’s largest employers.” Manhattan’s streets were jam-packed last week. Durst Organization spokesman Jordan Barowitz reported 75% occupancy on Sept. 13 across Durst’s 13 million-square-foot Manhattan portfolio. Insiders at Related say its Hudson Yards skyscrapers with 8 million square feet are 60% full.
JLL tristate CEO Peter Riguardi laughed, “I equate this to when you look at your iPhone and it says it’s raining, but you look outside and it’s sunny.”