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New York City Office Values Take $29B Hit, Comptroller Finds

Lower Manhattan

The coronavirus pandemic has taken a severe toll on the office capital of the world.

New York City’s total office real estate stock dropped 17% in value this year, according to a state report released this week. Tax appraisals of the city’s office buildings for 2022 put the worth of this sector of the property market, which spans 464M SF, at $29B less than it was after last year’s appraisals, according to the Office of New York State Comptroller Thomas DiNapoli

The dramatic decline is due to record-breaking vacancy and the rise of hybrid and remote work as well as the uncertainty that the office market faces, Crain’s New York Business reports

The top 10 office properties — including the World Trade Center and the General Motors Building — fell 12.5% on average from their 2021 appraised value, the report shows. 

“Employers are assessing how they use shared office space while considering shifts in worker preferences and the feasibility of long-term remote work. Some businesses have already instituted permanent hybrid remote-work arrangements, and others are contemplating similar plans,” DiNapoli's office wrote. “As these developments unfold, the future of office real estate is largely uncertain.”

But the office sector crisis hasn't been prompted merely by a radical change in the way people work — job loss in the office sector since 2019 eclipses the last two financial recessions, with office jobs accounting for almost 12% of the job loss last year, compared to just over 2% in 2008 during the Great Financial Crisis and just over 4% in the first few years of the new millennium, the report showed. 

This sector’s woes also spell trouble for the city’s coffers — $6.9B of the city’s revenue last year came from office property taxes. This year, that total will be significantly lower due to the change in property values. 

With all of the pain in the market, there are still investors and users willing to pay huge sums to expand their office property footprint in the Big Apple: German investor Commerz Real is under contract to pay GFP Real Estate and Northwind Partners $850M for 100 Pearl St., while Google is under contract to buy its campus at St. John’s Terminal from Oxford Properties for $2.1B. 

Leasing volume hit a new pandemic high during the third quarter this year, though availability was still at a record-high