Manhattan, the biggest real estate market in the U.S., has yet to see workers fully return to the office, which is costing New York $12 billion a year in lost sales, Bloomberg reports.

That doesn’t even take into consideration the billions in lost taxes.

In the fourth quarter, office attendance in Manhattan was just 43% of what it was before COVID. If New York continues running below capacity, the city will likely have to raise taxes and cut back on services such as transportation, education and law enforcement.

This could potentially create a downward spiral that Columbia University Professor Stijn Van Nieuwerbugh dubs an “urban doom loop.”

With foot traffic down as much as 52% on Fridays and subway ridership a mere 30% of what it was before the pandemic, “That’s a big hole that will need to be plugged with new taxes, lower spending,” Van Nieuwerburgh says.

Already, New York is planning to cut service on seven subway lines on Mondays and Fridays, including the 1 subway between Manhattan and the Bronx, and the L and F trains connecting Brooklyn and Queens into the city.

This doesn't even take into consideration the surge in crime since the onset of COVID. Robberies and burglaries were primarily behind the 22% increase in overall major crime in New York in 2022 from the year before, even though shootings and murders were down.

New York City Comptroller Brad Lander sums up the disheartening situation thus: “If less income tax is being paid in New York City, then it’s hard to figure out how to capture enough value to maintain the subways and invest in the schools and keep the city safe and clean and all the things that really matter.”

While other U.S. cities are also not fully rebounding from the pandemic, New York seems to be struggling more, with the average worker spending $4,661 less a year on meals, shopping and entertainment in Manhattan, compared to $3,040 less in San Francisco and $2,387 in Chicago.

However, the outlook is even more challenging in other cities abroad, such as London, where a mere 6% of employers in London expect their workers to return to the office five days a week.

New York’s outer boroughs, meanwhile, are benefitting from the continuation of remote work. In Brooklyn, for instance, transactions at restaurants and bars surged by 48% in the fourth quarter of 2022, compared to 2019.

For post-pandemic Manhattan, these sales were up only 18% in the fourth quarter.

Average retail spending on Mondays during the month of October was up 28% in the Bronx, 21% in Queens and 18% in Brooklyn—but just 2% in Manhattan, compared to 2019 Mastercard data.

Some economists say New York and other U.S. cities will need to figure out a way to deal with this new reality. Certainly, real estate developers have been talking about converting empty offices into housing.

In the meanwhile, CEOs of major companies like Goldman Sachs, Blackstone and American Express have been urging their employees to get back into the office five days a week.

Even Mayor Eric Adams made a plea to give up the new three-day office workweek: “It’s time,” he said late last year. “New York City can’t run from home.”