Posted on 09/26/2022 9:01:26 PM PDT by SeekAndFind
Is New York City's central business district finally recovering after Covid-19? The simple answer is no. Although residential rents in Manhattan were inflated to record highs, the rise of remote work quelled any recovery for the office space market in the borough.
Bloomberg reported blocks of decades-old office buildings sitting partially empty are becoming a multibillion-dollar problem for building owners.
Even though Goldman, Morgan Stanley, and other Wall Street firms have pushed for a return to the office after the Labor Day holiday, NYC's office-occupancy trends are still below half, according to card-swipe data provided by Kastle Systems.
Office vacancy rates have skyrocketed in NYC and other major cities worldwide, though it appears the US will have a slower office-market recovery -- this is likely due to persisting remote working trends.
Columbia University and New York University released a report that found remote work trends could force companies to reduce office space. They said lower tenant demand could result in a 28%, or $456 billion loss in the value of offices across the US. About 10% of that comes from NYC.
Partially empty office towers are leading to slower economic recovery in NYC. Many buildings with high vacancy rates were constructed between 1950-80 and had no meaningful upgrades.
The area is clustered with buildings from the 1950s to 1980s, many of which haven't been meaningfully upgraded in decades. The few that have been renovated struggle to compete with counterparts in tonier addresses on Park, Fifth and Madison avenues and new mega-developments on Manhattan's far west side.
The Third Avenue buildings have become "leave-behind space" rather than the types of offices that attract world-class tenants, said Nick Farmakis, vice chairman at Savills. -- Bloomberg
The picture remains cloudy for NYC because converting office space buildings to residential is challenging and expensive. Manhattan has had some conversions, but owners and developers are met with many challenges of zoning and architectural restrictions.
"The problem with Midtown is a lot of buildings need air and lights that the city requires, and you don't always get that," said Ran Eliasaf, founder and managing partner of investment firm Northwind Group, which is exploring residential conversions in the city. "Not every Class B building is an ideal target for conversion."
Older buildings are also being left behind as businesses desire newer ones or relocate out of the city. This leaves NYC with a rising number of older office buildings with high vacancy rates and has begun to impact how much property taxes the city brings in.
New York, like other cities, relies heavily on property taxes to fund schools, police and firefighters, as well as other services. Property taxes are the biggest source of revenue for the city, delivering about $1 out of every $3 taken in. And offices account for about a fifth of that.
Before the pandemic, the levies had climbed by about 6% a year on average, driven by rising property values. That helped finance new programs and services, as well as keep up with rising labor costs, said Ana Champeny, the vice president for research at the Citizens Budget Commission, a nonpartisan budget watchdog and research firm.
Manhattan's major office districts were no exception, generating steadily more revenue. But, in the fiscal year that ended June 30, the first to take into account the impact the pandemic had on real estate, tax levies from those areas declined by 11% to $5.24 billion.
The biggest drop was in a part of Midtown East north of Grand Central that the city's Department of Finance calls "Plaza," which contains some of the Third Avenue properties.
-- Bloomberg
The takeaway is that NYC has too many old office buildings that are no longer appealing to companies because of various factors due to remote working and the desire for new shiny new towers with top-of-the-line amenities.
Remember, we've pointed out There's An Amazing Glut Of Office Space In Every Major Metro Area and Office Space Market Faces "Economic Downturn" Due To Perfect Storm Of Factors.
There is little tolerance for crime and a high number of amenities which attracts a vibrant workforce and community.
Tokyo is especially interesting. There are neighborhoods for senior and medical tourists, for artisans, for young families, almost anything you can name. So conversion of excess office space into residential flats is a great opportunity.
Major cities in the USA, not so much.
Most of the previous conversions were older pre-air conditioning office buildings which utilized natural light and windows that open.
The glut on the market now is newer buildings post-air conditioning that have larger floor plates. People generally don’t want to live in apartments that don’t have windows with views and natural light. So the interiors of these buildings are not useful for residences.
Good points....
6) Once the existing corporate leases expire, combined with the telecommuter flight that’s already occurred, how will the city fund it’s socialist programs with the much reduced tax base?
You can only squeeze so much out of the rest of the state.
Watch ADAMS & Hochul command that they become HOMELESS housing.
2 rooms that many illegals will mix up.
Answer: Democrats steal federal elections and then send money collected by the federal government to Democrat money pits. Then, to get more money, they hire 87,000 new IRS extortionists and send them to work in red states.
Not only are property taxes going down, income taxes are decreasing as well. NYC, has been sticking people with income taxes if they physically work in the city. With people working at home, NYC can pound sand. Falling property values, decreased income tax, decreased sales taxes, decreased revenue from toll roads, decreased meter maid revenues... Of course, it’s not going to matter to the city, because the’ll just increase rates to make up shortfalls... which will lead to even more flight. I hope the entire evil city goes bankrupt. Again
There is also a proposal that will kill working in NYC even further — CONGESTION PRICING.
In order to work or travel to NYC from the suburbs and CT and NJ, you will have to PAY MORE to ease traffic and congestion.
Law of Unintended Consequences. The goal of the Great Reset is to warehouse in urban areas where they can isolate and control us - no cars (internal combustion engines), reliance on mass transit, etc. BUT the need to guarantee Trump got defeated through mail-in vote fraud caused them to unleash COVID and shut us down. They assumed it would further the great reset by replacing Trump with a controllable Biden AND accelerate the great reset by crashing our economy.
They did not think through the reality of the remote workforce. The economy was driven to its knees but did not crash. The American workforce went remote and NOW there is a freedom trend of remote worksites causing people to flee the big cities and they will not likely be returning.
To the libs who run these big cities (into the ground), EAT IT! It may not be what you wanted, but you got just what you asked for in unleashing COVID.
It may have been CoVid that pulled the trigger but the trigger was there waiting the first time some smart Johnny tried packet switching. And let's face it, high crime and tax rates and cramped working conditions are helping pull it.
No being under the thumb of ueber Leftist HR departments.
It's also because remote working has allowed many younger workers to leave their location and move to NYC without losing their job. The higher-paid ones are filling all those empty non-rent-controlled apartments and starting to revive the restaurants and other nightlife.
This is a good sign for us NYers. Eventually there will be a renaissance if these people stay.
NYC is triple taxed, Federal, State and City. Who wants that? Wouldn’t you prefer working from a low tax state like Florida, the decreased taxes alone provide a huge pay increase.
The younger ones left. Many of them returned to their parents' home in the suburbs, many just bailed completely.
Many of the younger ones were living with roommates who lost jobs and they couldn't find other young adults to move in.
People found themselves locked down alone in an apartment and realized that acquaintances and coworkers are not friends. Many headed out from New York City to Florida because it wasn't locked down.
Young couples saw what the lockdowns and school closures were doing to their kids and left New York City so their kids could grow up normal instead of surrounded by neurotic Branch Covidians.
In order to work or travel to NYC from the suburbs and CT and NJ, you will have to PAY MORE to ease traffic and congestion.
My only problem with them destroying their states like this is that it will drive these lunatics to the functional parts of the country. We sure as hell don't need any more of these damn yankees here in Texas.
Yes, that’s the other side of it. A lot of people fled out of fear.
Thankfully, there’s a whole new bunch moving in. Rents are sky-high again. Startlingly high.
You can tell they’re new to the city in various ways. They wait for the traffic lights to change before crossing the street, and stuff like that. We welcome them because they’re keeping our city alive, even though many of them act distant and superior.
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