New York City’s commercial property values are expected to fall substantially this year as the extent of the disastrous real estate fallout from the coronavirus becomes clearer.

The city’s 2022 budget expects property tax revenue to be $2.5B less than had once projected. The city’s overall budget gap has increased $1.5B since November, Mayor Bill de Blasio announced Thursday.

“The City’s 2022 preliminary budget was a wake-up call as to how dire our economic situation is. Federal aid is critical and the real estate industry continues to push for it,” Real Estate Board of New York President James Whelan said in a statement Friday. “However, it is a stopgap measure while the drop in property tax revenue will likely continue and possibly worsen.”

Property values for commercial properties, assessed in January of each year, are expected to nose-dive. Office and commercial property values are anticipated to fall 15.8%, multifamily properties with over 10 units are expected to decline 9.2% in value, while small multifamily properties are expected to drop 3.9%, according to the city’s budget summary.

The fiscal year 2022 budget expects less than $29.4B in property tax revenue, down from $30.7B in the budget for fiscal year 2021. Property tax revenue won’t recover to 2021’s total until fiscal year 2025, growing between 1% and 2% each year, according to the budget. This is a slower recovery than other streams of tax revenue.

A summary of the past year said that the real estate markets “collapsed” after the coronavirus gripped the city, with the decline in property transfer tax by 50% revealing how hard of a hit investment sales took. The city expects transfer tax revenue to decrease by 20% this year.

“Property values for 2021 were determined prior to the onset of COVID-19 and, so far, through the first half of the year, collections have largely come in on plan,” the summary states.

REBNY called on the city to proactively plan to stimulate growth.

“City and State elected officials must recognize this reality and begin to implement policies that will create good jobs and attract investment in our City, rather than make decisions that drive away jobs and investment,” Whelan said in the statement.

In interviews with Bisnow earlier this week, real estate experts pointed to anti-development sentiment in City Hall as a potential impediment to the city’s recovery.

Meanwhile, those that have criticized recent major development proposals — such as the failed Industry City rezoning — say they don't do enough to address community displacement and a lack of affordable housing. Public Advocate Jumaane Williams introduced a bill in 2019 that would require a racial impact statement as part of the land use process, which is currently being deliberated by City Council.