Experts: Commercial real estate in New York City doing better than originally thought
NEW YORK -- Many thought the pandemic left much of the city's commercial office space vacant. But it turns out that's not exactly the case.
As CBS2's Kevin Rincon reported Thursday, some buildings are hot, some are not, and some may be repurposed to draw people back to the city.
There is no shortage of commercial real estate in the city. But much like the housing market, the newer, renovated spaces, are in high demand.
"We just hit 95 percent occupancy, which is the highest occupancy number in the history of the building," said Jordan Barowitz, VP of public affairs for the Durst Organization.
At One World Trade, office space is becoming harder to come by.
"You see it in the residential market. Demand is at an all-time high. We don't think it'll be too long before we see that renaissance in the commercial market as well," Barowitz said.
And there's proof of that. The CBRE, which tracks office numbers in Manhattan, says as of March 31 leasing activity was up 100 percent year over year.
That's key to the city's comeback. When offices closed during the pandemic tax revenues were down. The Real Estate Board of New York says from November to December of 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 vacancies more than double to nearly 30 percent, but as the city emerges from the other side of the pandemic things are changing.
"Surveys show that, surprisingly, employees, one of the big reasons they want to get back to the office is to see their colleagues again," Decoster said.
Getting them back requires making the workplace a more attractive option than the couch.
"Those buildings, where it's hard to figure out why you want to go back into the office, those buildings are doing less well," Barowitz said.
Commercial space in older buildings might not be in high demand, but there could be another use for them. They could be converted into homes.
In December, a REBNY study found 10 percent of Midtown's older office spaces could be turned into 14,000 new apartments.
"It may be that the highest value for some buildings is residential, but certainly office is definitely in high demand," said Justin Myers, principal at Lee & Associates NYC.
Meyers is a commercial real estate broker in the city.
"In the past month or so we've had several deals that we had been working on where there had been multiple offers and competition on the space," Myers said.
Buildings lacking competition are part of the reason why office vacancy rates are still high. Right now, that number is at 14.7 percent in Manhattan.
In a normal market it would be closer to 10 percent.
Either way, the city is far from being in crisis.
"We've heard this story before. We heard it after Sept. 11. We heard it after the 'Great Recession.' New York is over. The office market is over. We heard it in the 1970s when a lot of Fortune 500 companies moved out of New York City," Barowitz said.
For now, it's a flight to quality, as we reassess what life after the pandemic looks like.