New research conducted by Deutsche Bank reveals a stronger return-to-office trend in New York City than previously estimated. While Kastle Systems' index of office-badge swipes indicates only a 50% return-to-office level, ridership on New York City's Metro-North suburban commuter lines during the week has reached approximately 75% of pre-pandemic levels.
However, ridership on Mondays and Fridays remains closer to 65%, suggesting that flexible work arrangements still have staying power three years after the initial COVID-19 crisis-induced lockdowns. It is important to note that limitations exist with Kastle Systems' data, covering only around 200 office buildings in New York City and potentially being influenced by "coffee badgers" who visit the office briefly to swipe their badges and grab a coffee.
In addition to Kastle Systems' data, August cellphone data from Placer.ai for Manhattan further supports the notion of a 75% recovery in New York City as compared to pre-pandemic levels.
Although Deutsche Bank's research team, led by Ed Reardon, cautions against becoming overly optimistic about the future of office spaces, they acknowledge that the return-to-office trend in New York City is stronger than commonly assumed.
Regarding the financial market, the S&P 500 index has experienced a 13.5% increase this year as of Tuesday, while returns for the DJ equity REIT Index were about 9.1% lower. Office REIT returns have been particularly dismal, declining by approximately 22% thus far in 2023, according to Morgan Stanley data.
The commercial real estate industry has been significantly affected by higher interest rates, especially for office landlords and those with low-rate mortgages nearing expiration. The 10-year Treasury yield, a key lending rate for the U.S. economy, rose to 4.65% on Tuesday after reaching a 16-year high in recent times.