The NY State Comptroller is now predicting NYC will recover by 2025, as the value of New York’s office buildings fell by $29 billion resulting in a $850 million drop in tax revenues. This drop is a 16.6% decline in market value, the first drop in office building values in the last 20 years.
To add fuel to the fire, the recovery to pre-pandemic levels is unknown. Many companies still in long-term leases may shift to remote work, or downsize, leading to further declines.
The office market is a large generator of tax revenue for the City. Of the City’s $93B budget, $32B comes from property taxes of which $17B comes from commercial properties. A 16% decline in values would on its face result in a $2.72B—that will not happen. The City will increase the rates for commercial and other properties to maintain the same percentage of the budget. The net result is commercial property owners will see their tax increase versus their property value.
The danger of high taxes is companies will begin to move out—reminiscent of the ‘70’s.
Contact GE Grace for expert analysis of your real estate holdings. Call George at 646 312 6800 or email him Grace@GEGrace.com.