‘Doom loop’ professor says things are actually looking up for New York City

It’s not every day that an academic paper inspires a flurry of apocalyptic headlines, and one that expands the lexicon is even rarer still.

But Columbia Business School professor Stijn Van Nieuwerburgh’s use of the phrase “urban doom loop” in 2022 initiated an intense national debate began about the future of U.S. cities like New York in the era of remote work.

A year ago, Gothamist examined his hypothesis, which was first seen in his paper “The Remote Work Revolution: Impact on Real Estate Values and the Urban Environment.” In sum, he argued that if workers continued to stay away from commercial districts like Midtown and Lower Manhattan, the subsequent loss of billions of dollars in real estate, transportation and other government revenues could force cuts in essential services, fueling problems (i.e., more homelessness, dirtier streets and worse commutes) that prompt even more workers to stay away.

Doom loop fears haven’t been confined to New York. Office occupancy rates have also declined sharply in cities like Charlotte, Hartford, Atlanta and Milwaukee. Major employers have left Chicago. In San Francisco, predictions of what SFGate calls “an inevitably empty, dystopian city” have prompted a doom loop backlash, complete with ironic “SF is Dead” T-shirts.

But in a December interview at his office overlooking the Hudson, Van Nieuwerburgh said New York appears to be weathering the storm in some ways. Workers are returning to the office at higher rates and tourism is nearly back to its pre-pandemic levels.

But the “Prophet of Urban Doom,” as one headline called the Columbia scholar, said it’s too soon to declare victory as serious budget cuts loom on the horizon.

In terms of foot traffic in business districts, New York is doing better than other American cities such as Dallas, Chicago and San Francisco, but the pace of improvement has especially lagged downtown, where the office visitation rate was 60% in October, compared to 71% in Midtown, according to the Real Estate Board of New York.

And an analysis of commercial real estate by the firm Avison Young shows 20% of Manhattan office space was available in 2023, the highest proportion since the company started collecting data in 2005.

Nonetheless, Van Nieuwerburgh said, the fact that considerable swaths of commercial real estate in the New York region remain empty presents stakeholders with a golden opportunity. He said that if New York plays its cards right, it can emerge greener, more accessible, more exciting and more vibrant than it was prior to the pandemic.

This conversation has been lightly edited.

The doom loop discourse has really taken off, hasn’t it? Do you find that validating from a professional standpoint, or largely alarmist?

Van Nieuwerburgh: Well, as an academic I’m happy to have some impact on the real world. At the end of the day, that’s what it’s all about. It’s about studying phenomena and informing the public. And so I’m happy that this work has received some attention. In particular, because I’m hoping it will lead to some concrete changes.

Outside of this circle of academics, real estate experts and policymakers, do you find it curious how the conversation has taken on a life of its own?

Because real estate is something that concerns everybody. We all live in a place. We all have a house, a roof over our head. We all shop. We all live in an office. Real estate is New Yorkers favorite pastime story. So this is something that speaks to everybody’s imagination.

Do you think that the city has taken steps that have mitigated the worst sort of doom loop outcomes or is it still too early to say?

I think the truth is it’s too early to say. That said, I have noticed a lot of awareness of the issue over the past year, as well as some very concrete steps that city leaders have taken.

Let me mention, for example, the City of Yes proposal that the Adams administration has come up with [to make more affordable housing available throughout the city, including in converted office buildings], and the report that was published, the so-called “New” New York plan [with 40 recommendations for reimagining how and where people work]. It has resulted in a conversation and it has also sort of resulted in a new housing policy that unfortunately did not pass last year, but there’s a desire to revisit that in the upcoming year. So I think there’s a lot of hope that we can construct a way forward that will help mitigate these problems.

Beyond the initial doom loop paper itself, are there other conversations that you’ve been part of that you think are really moving this forward?

Yes, I’ve been part of a group of people, a working group that has been thinking about the future of New York City’s real estate market with a view towards improving this triple problem of excess office, too little housing, as well as the climate transition in the built environment.

We’ve brought together a group of people from both the public and the private sector that can help change the rules of the game, but then also can put dollars to work to make these investments happen.

Do you find that private developers are as interested in heading in this direction as people like you are, or do they stand opposed to that kind of dramatic change?

Well, I think there’s a tremendous amount of interest in these office conversions [into residential units]. We’ve noticed this after we released our conversion paper. We received interest from all over the country. People asking us, ‘Which buildings do you think are the best conversion candidates?’ Also, people from governments, like local planners that are trying to change what uses different types of real estate have.

Are there particular proposed cuts that you find most ominous and that you think threaten to prove the points that you made in your paper?

Well, as severe as they have already been, these budget cuts are just the opening salvo in what will be needed in the next few years. The Citizens Budget Commission has projected [multibillion-dollar budget] deficits for New York City. So that’s a serious hole, and it remains to be seen how we will dig ourselves out of that fiscal hole.

Do you think certain cuts could really kind of add to that sense of desolate commercial spaces and sectors?

Well, one thing I am worried about is, the health of the city begins and falls with having a sense of public safety. And so some of the cuts that are hitting overtime for the New York Police Department are something that worries me.

Are there aspects of city life that have made you personally consider leaving New York?

Well, I think of cities as coordination devices. You know, I like to go to my office when my colleagues are there as well, because then we have conversations and our work moves forward. When nobody’s around or when stores are closed, it makes the city that much less appealing and there’s much less reason to be here. So I feel that New York City is coming back, because people are coming back to the city and when people come back, it makes it more attractive for their colleagues and their friends to come back as well.

On a local level, what do you think the city should do with all its empty office space? Turn into affordable apartments? Hand it over to artists?

I think we need to pursue an all-of-the above approach. Meaning that there’s not just one use for all that excess office. There’s a multitude of uses. And at the end of the day, we want to create vibrant neighborhoods, and vibrant neighborhoods require housing. They also require hospitals or health care facilities. They require some educational facilities. They require some artists space, some community space. We need all of these things. Now, I certainly think that housing is probably our most pressing need. So whenever a building is amenable to it, I think that conversion from office to residential should be our first choice. But we’re going to need a variety of buildings.

In a recent paper, you and your co-authors argued that 30% of New York City’s office buildings could be turned into green housing, and 11% nationwide. It sounds like, from an environmental point of view at least, it’s not all doom and gloom, is it?

Not at all. I think the climate, the climate transition is something that, you know, worries all of us as a society greatly, and buildings account for something like 30% of all greenhouse gas emissions. So this is an opportunity for us to green these buildings. And while we’re at it, we might as well convert them from offices to residential use whenever feasible, right? So I think that’s going to create jobs. It’s going to create new housing units, which we desperately need. It’s going to create a lot fewer emissions. And so I think this is sort of a positive step that we can make as a city.

A year ago, the governor and the mayor released a very ambitious and forward looking plan called “New” New York, and it starts with the premise that hybrid work is here to stay, so let’s just work from that premise. So how promising is it in terms of vision and speaking a year after the fact, in terms of execution?

I think the vision the plan lays out is a wonderful vision. It’s a very encompassing vision that not only thinks of this as a real estate problem, but thinks of it as a community problem. What is it that we need to do to make these neighborhoods more vibrant beyond, for example, converting individual buildings? And how do we make sure that we don’t leave a lot of the citizens behind in the process? One issue is that there’s no dollars in the plan. So this is going to cost money and we need to think carefully about which investments make most sense for our community.

One year later, the process is moving ahead. There’s a lot of bureaucratic hurdles and hoops to jump through. But I think the plan is moving forward, and I’m very hopeful that in 2024, both New York City’s City Council as well as New York state will pass new legislation to make this a reality.

The cities that seem to invite the doom loop analysis more than any others are San Francisco and New York. But in terms of office occupancy and in terms of foot traffic, there’s a lot that separates these cities, isn’t there?

There is. And in fact the divergence between those two cities, between New York City and San Francisco, has actually grown over the past year.

San Francisco is spiraling further downward. New York City is recovering to a better extent than most large U.S. cities. And I think that has to do with the fact that New York City’s economy is a well-diversified economy. We have a lot of different sectors, whereas San Francisco is fairly tech-dependent.

And it also has to do with the fact that the financial sector, which is always prominent in New York City, has been pretty strict about the return to the office.

What else has New York got going for it compared to other cities that are struggling to recover in terms of commercial district vibrancy?

What New York City has going for it is that it’s an amazing place to live, not just to work. We have amazing cultural amenities. We have a wonderful restaurant scene.

We have a lot of young people that want to be here. They want to go to the bars and to the clubs and all that jazz. I think the fact that New York City continues to attract those young people, those 22- to 25-year-olds, because of its vibrancy is what really sets our city apart.

One thing that wasn’t in the picture when you published your paper was congestion pricing. What effect do you think congestion pricing could have on all of this?

Well, congestion pricing is a necessary funding vehicle for things like public transit, which were severely underfunded. Fortunately, we’ve managed to close that funding gap for the foreseeable future. That’s a major plus for New York City because New York City does not function without public transit. I think it could also help to make the city a more commutable city where you could more easily bike, where there’s less pollution. Pollution has a lot of health downsides. Congestion pricing is definitely a big plus for the city, as far as I’m concerned.

One thing that seems to be missing from much of the press coverage is the idea that this doom loop, which has grabbed all these headlines, is not inevitable, is it?

It’s not inevitable. We will chart our own course, and it will depend heavily on both the public and the private sector. It will depend on what policy changes are being made, both in Albany and in the City Council. It will depend on the investments of the private sector and more housing units and more of these office conversions. It will depend on communities to respond and approve these types of projects. So we have our destiny in our own hands. I believe that firmly.

Do you have a sense on your more optimistic days about how the city could look 10 years from now if these things really kick in?

I think 10 years from now, we could have possibly 50,000 new housing units that we don’t have today from office conversions that would make these neighborhoods like downtown and Midtown more vibrant, more diverse, more mixed places where there’s more than just lots of offices. It could really turn New York City into an even more wonderful, vibrant place to live than it has been so far.

Do you think, based on your conversations with people from the private sector, that the market is interested in creating affordable housing in these neighborhoods? Because that’s been missing from the equation for many years.

Everybody’s interested in creating affordable housing. The question is, is it feasible to create affordable housing and what needs to be done to make it feasible? A lot of apartment development is typically financially infeasible as new construction. And so when policy makers want to create more affordable housing units, they typically will need to put some dollars towards that.

Now we had a very successful program in New York City called the 421-a housing program that created most housing units in New York City in the last decade-plus. The nature of that 421-a program was basically, if you build a new building, you need to set aside a certain fraction of units for people making below average income.

We need a new program. I think we can have a more narrow program that focuses on office conversions and make sure that when we turn these offices into apartments, we create some affordable units as part of these conversions. I think that’s something that’s politically a smaller lift than an entirely new 421-a housing program for all housing development.

This article was originally published by a gothamist.com . Read the Original article here. .