New York City’s office buildings have seen property prices plummet for more than two decades as the epidemic shut down businesses and sent thousands of workers home, raising serious questions about the city’s financial health.
The full market value of the New York City office building was pegged at 2 172 billion in fiscal year 2021, according to a report released Thursday by New York State Regulator Thomas Dinapoli. It fell 16.6% in the fiscal 2022 final valuation roll, which the report calls the first such fall “since at least fiscal year 2000”.
The epidemic “wiped out year-on-year growth in New York City’s office sector,” the report said. It removed about 28 28.6 billion in market value from the city’s 463 million square feet of inventory, and spent more than 50 850 million in property taxes in the city’s 2022 budget.
In FY 2021, the value of office property reached 2 172 billion, the billable value, which is the market value on which property taxes are levied, reached 71 71 billion, the report said. These values were assessed before the epidemic began, and both values more than doubled in the previous 10 years.
Across the city though. “Some of the city’s most expensive office properties have declined significantly,” the report said. For example, the market value of the World Trade Center Complex has dropped by 23.1%.
The report said that in the second quarter of 2021, the vacancy rate was “1.3%”, “a level not seen for more than 0 years”. Rent demand was low as well, but only 4.2%.
The Comptroller’s Office estimates that by 2021, the city’s office sector will generate at least 9 6.9 billion in direct revenue from property taxes, real estate transaction taxes, mortgage taxes and commercial rent taxes – and that’s just direct costs, with no multiplier effect. According to the report, property tax collection will decline by 5.4% or 1. 1.7 billion in fiscal year 2022, more than half of which is due to reduced office billable value.
The report noted that a large portion of the commercial space remained vacant, with some discussions on converting some of it into residential use. Marketwatch has previously reported on that possibility.
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