In part 1 of this series, we talked about COVID's impact on commercial tax assessments and New York City's tax revenues. In this post, we will examine how some property owners are thriving based on a pandemic windfall and the outlook for NYC's commercial real estate market going forward.
A Pandemic Windfall
Though the market value of commercial office space dropped during the pandemic, the real-world worth of some buildings didn't take as much of a hit. A 33-story tower owned by Tishman Speyer and Silverstein Properties experienced a revenue increase of about $61.5 million due to the building's wealthy tenants and high occupancy rate. Despite this increase, however, New York City reduced the building's assessed value by 25%. If its tax rate stays the same, Tishman could potentially boost its profits by 30% from this tax reduction alone. Other building owners with tenants like Amazon and Apple are poised to receive the benefits of the same tax windfall too.
How NYC Created A Tax Windfall
In assessing the value of commercial buildings, NYC usually relies on a mass appraisal methodology and the information building owners submit about their properties. Due to COVID-19, NYC considered other metrics such as unemployment rates and office vacancies in making it tax assessments this year. Though done with the best of intentions, the result of this new assessment process seems to be that some building owners will have record profits while others will continue to struggle.
Outlook For NYC Commercial Real Estate Assessments
Because of the discrepancies in the assessed values this year, it is likely that building owners will challenge their New York City tax assessments for years to come. And with the decrease in tax revenue, NYC's ability to spend on social services may be hampered as well. Until the City is fully back to normal, it won't be entirely clear how or when the real estate market will recover.
Need Help With A Commercial Real Estate Issue?
If you need sound real estate advice in New York or New Jersey to help you during these fluctuating times, Melvin Monachan, PLLC is to help. Call us now at (347) 389-1682 or go online to a private consultation with one of our seasoned attorneys today.
Interested in learning more? Find part 1 of this discussion here (link to part 1)