This is a worrying phenomenon
The 47-story skyscraper that housed the offices of Deutsche Bank in New York remains eerily empty as of 2021, at least for a building in the center of developments and in the heart of the “Big Apple”.
It is one of an unprecedented number of unused commercial spaces in New York. Vacancies hit a record 22.7% this year, with experts predicting the rate won't drop below 19% until at least 2026.
Although New York is showing signs post-pandemic recovery, with rents rising, tourism returning, and workers returning to work for life, offices, especially in Lower Manhattan, don't seem to be following the same trend.
< p>Asking rents for office space are likely to hit their lowest levels in a decade, according to the latest expert forecasts. The average Manhattan office rent was $75.13/sq m in April 2023, 50 cents cheaper than in 2022.
Unintended Consequences
This is a troubling phenomenon, at least for municipal officials, who for the past decade have depended on the ever-strengthening real estate sector, whose taxes provide liquidity for municipal police and garbage collection.
Property taxes contribute about 20% of the city's total tax revenue – with office buildings, in particular, contributing 10%. And as that revenue dwindles, the city's expenses continue to “run,” a development that poses a challenge to Mayor Eric Adams' agenda.
To balance the budget, the city has asked municipal services to cut spending, leaving vacancies to be filled or cutting services.
The independent authority's estimates coincide with those of the municipal authority on slow growth in both tax revenues (including taxes from commercial use of real estate) as well as total revenue.
When asked what the plan is to save New York's commercial real estate market, Mayor Adams has repeatedly emphasized that, both at the city and state level, it needs to be eased the possibility of converting the offices into living spaces.
Source: Bloomberg
