Tax Revenues From New York City Office Buildings Rise, Despite Vacancies

Even as office buildings in Manhattan struggle with vacancy rates hovering just below 25 percent, the assessed market value of New York City office buildings has continued to rise, fueling a slight increase in city tax revenue, according to a new state comptroller report.

The buildings’ value has rebounded from the sharp decline that immediately followed the arrival of the coronavirus pandemic, which disrupted corporate work culture and led many companies to reduce their office footprints. Now, the overall value of the city’s towers has climbed to $204.8 billion, up from $202.3 billion in 2020.

The optimistic outlook is in sharp contrast to the reality for a swath of New York City office real estate, which continues to see buildings sold at steep discounts, some going for half of what the previous owners paid.

The comptroller’s analysis focuses on the market value of buildings as assessed by the city’s Department of Finance for property-tax purposes and does not necessarily reflect the value of the buildings if they were sold. For instance, the city had assessed a market value of $295 million for a 23-story office tower at 135 West 50th Street in Midtown Manhattan, but it sold last week for just $8.5 million.

Based on the assessed value, the buildings will pay $7.6 billion in property taxes to the city over the next fiscal year, compared with $5.8 billion in taxes collected during the 2020 fiscal year. The $7.6 billion accounts for about one-fifth of all the property taxes the city is expected to collect during the 2025 fiscal year, according to the report, which was obtained by The New York Times. Property taxes are the largest revenue source for the city, helping fund critical services like those provided by the Police, Fire and Sanitation Departments.

The comptroller’s report largely paints a bullish and resilient portrait of New York City’s office market, the largest in the world. The findings underscore the essential role of the city’s office towers, as well as the employees who work in them, in driving its economy and funding its government.