New York City's Office Workers Are Gone. Landlords Are Sounding the Alarm

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Shaerf loves the Chrysler Building. But he tells Rosen that after 16 years, AMA is leaving. "You're charging us too much money," he says. "We can't afford to stay."

"Hey, if you leave, trust me, the line to take this space will be pretty long," Rosen parries.

"I hope so," Shaerf says.

"Don't leave," Rosen says, heading for the elevator. "Pay the high rent. Come on!"

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A week later, Shaerf, who lives in Manhattan, says the company decided a while ago to decamp to the suburbs, where four of the senior executives reside, and that the rent had nothing to do with the decision. That was before the pandemic. Shaerf says his partners wouldn't come back now even if Rosen sliced their Chrysler Building rent in half. They don't want to get on a train and come into Midtown. It isn't just the threat of Covid-19. "There's nothing to draw them in right now," Shaerf says. "There's no nightlife. And there's no day life."

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Rosen says the city's future will improve next year when New Yorkers replace de Blasio. He's a fan of Ray McGuire, the former vice chairman of Citigroup Inc. who resigned in October to run for mayor. Rosen is also hopeful that President-elect Joe Biden will push through a stimulus package that will include billions for the city. If the U.S. Senate remains in Republican control, however, Biden may be constrained in his ability to be a savior.

He says RFR's three New York hotels and six restaurants will be closed until sometime next year. "I don't know if we'll get a spring season," he laments. He estimates his company has been collecting about 50% of the rent from its retail tenants. Rosen instructs his leasing agents to treat them gently. The last thing he wants is vacant storefronts at his properties.

Luckily for RFR, its office tenants have continued to pay their rent, even with their employees working at home. It remains to be seen, though, whether Rosen can continue to sign leases in the Seagram Building for upwards of $185 a square foot, more than twice the average asking price in Midtown of $84, according to real estate company CBRE Group Inc. Long before the pandemic, Wells Fargo & Co., which occupied more than a quarter of the building, said it was moving to Hudson Yards. To lure new tenants, Rosen has embarked on a $30 million plan to turn the building's underground parking garage into what he calls the Playground, an oasis with a rock climbing wall, an indoor track, a basketball court, a boxing ring, and a town hall able to accommodate as many as 140 people.

Once the Playground is completed, Rosen says, tenants will never want to leave the Seagram Building, particularly younger ones. But even after Covidâ€`19 subsides, how many will want to sweat and breathe heavily beside their co-workers in an underground garage, no matter how much RFR spends beautifying it?