Experts: Commercial real estate in New York is doing better than originally thought
NEW YORK — Many believed the pandemic had left much of the city’s business offices vacant. But it turns out that’s not exactly the case.
As CBS2’s Kevin Rincon reported on Thursday, some buildings are hot, some aren’t, and some could be revamped to bring people back to the city.
Commercial real estate is not lacking in the city. But just like the housing market, new renovated spaces are in high demand.
“We just reached 95% occupancy, which is the highest occupancy in the building’s history,” said Jordan Barowitz, vice president of public affairs for the Durst organization.
At One World Trade, office space is becoming increasingly difficult to find.
“You see it in the residential market. Demand is at an all-time high. We think it won’t be long before we see this revival in the commercial market as well,” Barowitz said.
And there is proof. CBRE, which tracks the number of offices in Manhattan, says that as of March 31, leasing activity was up 100% year-over-year.
It’s the key to the return of the city. When offices closed during the pandemic, tax revenue was down. The Real Estate Board of New York says that from November to December 2020, in just those two months, the city lost $250 million in taxes.
“It could have been worse,” said Keith Decoster, director of market data for the Real Estate Board.
Decoster says storefronts in office-dependent areas had more than doubled to almost 30%, but as the city emerges on the other side of the pandemic, that’s changing.
“Surveys show that, surprisingly, employees, one of the main reasons they want to return to the office is to see their co-workers again,” Decoster said.
To get them back, you have to make the workplace a more attractive option than the sofa.
“Those buildings, where it’s hard to figure out why you want to go back to the office, those buildings are doing worse,” Barowitz said.
Commercial spaces in older buildings may not be in high demand, but they could have another use. They could be transformed into dwellings.
In December, a REBNY study found that 10% of old Midtown office space could be turned into 14,000 new apartments.
“The highest value for some buildings may be residential, but offices are certainly in high demand,” said Justin Myers, director of Lee & Associates NYC.
Meyers is a commercial real estate broker in the city.
“Over the past month, we’ve had several deals that we were working on where there had been multiple bids and competition for space,” Myers said.
Uncompetitive buildings partly explain why office vacancy rates are still high. Currently, that number is 14.7% in Manhattan.
In a normal market, it would be closer to 10%.
Be that as it may, the city is far from being in crisis.
“We’ve heard this story before. We’ve heard it after 9/11. We’ve heard it after the ‘Great Recession’. New York is over. The office market is over. We’ve heard it in the years 1970 when many Fortune 500 companies left New York,” Barowitz said.
For now, it’s a flight to quality, as we reassess what life after the pandemic looks like.