Despite struggling to find tenants in the age of hybrid work models, New York City’s office buildings have actually increased in value.
What’s more, according to new figures from the Department of Finance, the market value is higher than it was before the coronavirus pandemic.
In its tentative property tax assessment roll for fiscal year 2025, out this week, the department determined city office buildings to be worth approximately $173 billion, slightly more than the $172.4 billion the department estimated they were worth in the pre-COVID days — and 3.5% more than their value last year, Crain’s reported.
In fact, NYC’s commercial properties overall have generally gone up in value — the department’s new report puts their worth at roughly $330 billion; pre-pandemic, that number was $326 billion.
With remote work reportedly halving the value of offices, which are so empty that the city is expediting their transformation into housing, how can this be?
Former Department of Finance commissioner and current New York University professor Martha Stark told Crain’s that, significantly, it’s because many tenants, no matter how many of their employees are now working remote, are still stuck in old rental agreements and continue to pay up for the space.
(Notably, the department’s determinations are based not on office sales prices, but the buildings’ income and expenses.)
“Even though a lot of office building owners have claimed that they’re empty or that people are giving up their space, if the tenant had a long-term lease, they’re still on the hook for rent,” she told the publication.
The Department of Finance has a different theory: recent construction and renovation spending for the value increase.
However, this spending, according to the department, was mostly in high-end office buildings, demonstrating a trend of companies flocking away from older office stock to fancier, newer developments.
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