Getting workers back in offices is still the top priority for managers, city officials, and, of course, office building owners. What leads to more office attendance has been the main question on all of their minds over the past two years. Companies and management experts pored over statistics on office visitation, foot traffic, and badge swipes to try to understand why exactly people decide to go back to a physical office. Are luxury amenities the key? What about other kinds of perks? Is the answer high-profile restaurants in ground-floor retail spaces? Whether or not those ideas are leading to better office attendance can vary widely depending on the market, the building, and the individual occupier.
One of the factors that might be the most important when it comes to the return-to-office doesn’t have to do with the office itself, it’s the commute. There’s been a lot of talk about transit-oriented development and how major public transit hubs bring big benefits to office districts. So let’s take a closer look at public transit ridership rates and office occupancy in some of the country’s largest cities.
New York City
With a population of nearly 8.5 million in the metropolitan area and a vast public transit system, New York City is on its own level. Despite recent upticks in ridership numbers, ridership figures are still well below pre-COVID numbers. A report from February of this year showed there were 84.3 million subway trips that month, which added up to 67 percent of ridership numbers recorded in February 2019. For bus trips, the level was similarly below pre-pandemic numbers, with 33.2 million trips, or 65 percent of ridership in February 2019. While there were significantly less trips taken on the weekend, 15.2 million total in February, the figure is about 75 percent of numbers seen in February 2019. Despite the uptick in ridership, nearly all subway stations in NYC have fewer riders than before the pandemic began, according to a recent report.
Of the stations most impacted, the Wall Street 4 and 5 train station, in the heart of the Financial District, recorded only 40.6 percent of ridership numbers from 2019. The area’s office market has been impacted too. In Colliers’ first quarter 2023 office report, the Financial District submarket recorded an overall availability rate of 25.8 percent, one of the highest rates among all NYC submarkets. After a major dip in leasing in the fourth quarter of 2022, leasing volume in the first quarter of this year jumped nearly 50 percent, led by several major transactions that together accounted for almost a third of total leasing volume, according to Colliers. Of those 250,000-square-foot plus deals, all but one were in Midtown and Midtown East, where major transit hubs like the Rockefeller Center subway station, Times Square, and Grand Central are located.
Chicago
In the unofficial capital of the Midwest, Chicago’s greater metropolitan area has a total population of nearly 2.7 million. The Chicago Transit Authority (CTA) is the agency that oversees bus and train service in and around the city. The CTA’s latest report found that ridership has hit the highest levels the agency has seen since 2020. Last year, annual ridership was 243.5 million, an increase of more than 47 million from 2021. Of that, bus ridership jumped 19 percent and rail ridership grew 32 percent. CTA officials attributed the ridership growth in part to more workers returning to the office. The city’s L train system, one of the largest and busiest in the world, has two train lines that operate 24 hours a day, seven days a week. However, a recent report found that CTA trains have struggled with delays and gaps in service since the pandemic began.
While Chicago is working to make its public transit more reliable, vacancy in the city’s downtown office market recently hit a record high of 22.4 percent in the first quarter of this year. The rise was attributed to the staying power of remote work policies and widespread layoffs that have led to occupiers cutting office space. Like a lot of cities, Class A office space is getting the most lease volume while Class B and Class C buildings are struggling to find tenants. Many larger occupiers are announcing layoffs and consolidating office footprints in order to cut costs. Analysts anticipate that the rest of this year will continue to be difficult for Chicago’s office market, but there is light at the end of the tunnel. The market is experiencing growing tenant activity after three years of “stalled decision-making,” according to Colliers.
Washington, D.C.
The nation’s capital is also home to the country’s third-largest transit system. Operated by the Washington Metropolitan Area Transit Authority (WMATA), the network recorded an annual ridership of about 157 million last year, an increase of 74 percent from the previous year. Like most cities, the impact of the pandemic on the system and its finances dealt a huge blow to the system. The Metro was sharply criticized last year after a number of issues including regulatory scrutiny, scandals, and mishaps led to what one article described as service that has “spectacularly fallen apart.” The transit authority is facing a potential deficit of $356 million in the fiscal year 2024 budget, due to ridership numbers still only accounting for 53 percent of the number of trips taken pre-pandemic.
As D.C.’s public transit has struggled, so too has its office market. The office vacancy rate in the first quarter of this year was 18.2 percent, a slight uptick over the previous quarter, according to Colliers. Faced with one of the highest vacancy rates in the country, Mayor Muriel Bowser recently proposed expanding property tax breaks in order to encourage developers to convert vacant offices into housing. Already, there is 1 million square feet of office being converted to housing, and Bowser is hoping to add 6 million more square feet to that. While office occupancy in the city jumped from 24 percent in January 2022 to 46 percent in January 2023, overall occupancy is still 54 percent below levels seen pre-pandemic, according to the D.C. Policy Center.
Boston
In Boston, which has a metro area population of more than 4.3 million, the Massachusetts Bay Transportation Authority (MBTA) is the agency in charge of public transit and oversees one of the largest subway systems in the country, known by locals as the T. There’s a variety of options for riders, including five subway routes, 177 bus routes, 137 commuter rail stations, and a commuter ferry service. After experiencing major disruption due to the pandemic, ridership numbers have grown on all of the services the MBTA oversees. But last year saw a number of incidents, including weeks-long shutdowns, a fire, and a death, that have led to calls for more investment in the transit system. A shortage of staffing and federal safety mandates have led to slower trains and a system that “doesn’t work like it’s supposed to.”
The city’s office market has struggled recently as macroeconomic forces have weighed on occupiers’ decisions around leasing. Boston’s office vacancy rate was 18.8 percent in the first quarter of this year, matching where it stood during the Great Financial Crisis, according to Colliers. Sublease space has risen as companies have laid off workers and shrunk office footprints due to remote work policies. But the city’s office market also has some bright spots. The job market is particularly strong at the moment, with more white-collar jobs in the metro area than ever before. In Colliers’ Q1 office report, Boston ranked second behind San Francisco for the largest GDP per capita of the 10 largest metro economies in the U.S. And Class A buildings are outperforming older buildings significantly, with the vacancy rate for properties built within the last decade less than half the overall rate.
San Francisco
Public transit in San Francisco is made up of Muni, the city’s bus and metro system that operates buses, trains, cable cars and streetcars; and Bay Area Rapid Transit (BART) trains. The agencies, which serve a metro area population of 3.3 million, have not been immune to the loss of ridership and revenue that occurred as a result of the pandemic, and they are still trying to regain their footing. BART ridership, while posting higher numbers on the weekend, has experienced a major drop in riders during the week, hitting a ceiling of 30 to 40 percent of expected ridership. On the bright side, Muni has reported an increase in ridership recently as a result of improvements to the system.
The low weekday ridership numbers, especially on BART trains, have been attributed to the high number of companies that have transitioned to remote work on a more permanent basis. It’s one of the biggest reasons behind the city’s record-high office vacancy rate, which hit 29.4 percent in the first quarter of 2023, an almost 2 percent increase from the previous quarter, according to CBRE. The ongoing trend of layoffs has hit tech–the largest industry in the city–especially hard, and a high interest rate environment, a looming economic downturn, and ongoing issues around homelessness, crime, and safety have all had an impact on the city’s struggling office market.
