For the first time in two decades, NYC office buildings saw their billable values decline.
Pandemic Impact on NYC Office Market Remains Unrelenting
The market value of office buildings in New York City plunged -$28.4B during the last fiscal year, according to a report from the State Comptroller Thomas DiNapoli.
Not only does this drop of $28.6B represent a valuation drop of -16.6%, it also marks the first decline in NYC office market valuations since at least 2000. As a comparison, total market value of office properties in NYC reached $172B in the previous fiscal year.
Other indicators point to the crippling effect of the pandemic on NYC’s office market. The office vacancy rate hit a 30-year high of 18.6%, definitely outpacing the vacancy rate of 15.2% at the end of 2020.Likewise, asking rents averaged $70.26, well below the average of $72 in each of the last five years.
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NYC’s Three Major Business Districts Are Forming Scars:
- Midtown South – vacancy rate at 9%; asking rents down more than -10%
- Midtown and Downtown – asking rents down -3% – -4%; vacancy rate up 6 – 7%.
In the midst of all this carnage, NYC stands to lose some $1.7B in property tax revenue during the current fiscal year.
Glimmers of Hope
The Real Deal formerly reported that demand finally exceeded supply in Manhattan’s office market in Q3 2021. Colliers International’s quarterly market report indicated leasing volume from July to September increased +58.5% q/q, a rise to 7.23M square feet. Also in Q3, the net absorption rate turned positive at 0.87M square feet.
Google shattered a pandemic record by its acquisition of St. John’s Terminal in Hudson Square for $2.1B.
Lastly, Cushman & Wakefield predicted an in-migration to the office beginning in Q1 2022. Co-author of Cushman’s study David Smith said, “Most businesses are hoping to get back as soon as possible. Based on surging tour activity, we know demand is there – so it’s not a matter of if office buildings will repopulate, but when.”
Thanks to The Real Deal.