According to Comptroller Thomas DiNapoli’s latest report, the overall value of New York City’s office buildings took a $28.6 billion beating in the past year. This reportedly is the first time their worth has decreased since the New York State Comptroller’s office began tracking data in 2000.
The report details that, between 2011 and 2021, the market value of NYC office properties more than doubled. When the pandemic began, however, their worth went from $172 billion to $143 billion. Since July, data shows that NYC’s 10 most expensive properties reportedly lost 12.5% of their value; this includes the World Trade Center (-23%), the General Motors Building in Midtown (-16%), and the Bank of America Tower by Bryant Park (-16%).
Consider the state of the NYC office market right now. For reference, NYC has almost 500 million square feet of office space – making it the largest market in the world. Unfortunately, in the spring, vacancy rates reached a 30-year peak; coming in at 18.3%, this rate decreased the value of office property throughout the entire city. Not all neighborhoods felt the effects to the same degree, however; for example, Midtown had a 19% vacancy rate, while Midtown South reported 17.5% and downtown reported 17%. As a result of these generally high rates, asking rents began to quickly decrease – at a rate of 4.5% overall; taking the same neighborhoods again, Midtown South reported a sharp decline of 10.2% while Midtown and downtown reported decreases of 4% or less.
While this is inherently bad news for the landlords of these office buildings, the repercussions of this value loss have a much broader impact. Take into consideration the impact on taxes. These buildings constitute over 50% of the city’s property tax revenue; between July 2020 and July of this year, taxes declined by $1.7 billion. The combination of low occupancy rates and less income has resulted in a lowered market value – which directly decreases tax bills. What has caused this decline? Experts cite the popularity of remote work and less desire for commercial properties as the leading factors. While the latter has less of an impact than the office sector, the former constitutes a major crisis because “without people, you don’t need space. It’s a hefty sum of money lost. It’s going to take a few years to build back,” according to Deputy Comptroller Rahul Jain.
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