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Q&A
Analysis of Manhattan office vacancy rates and potential residential conversions
3:50:11
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3 min
Council Member Brannan and the Comptroller's office discuss the high vacancy rates in Manhattan's Class A office space and the progress on office to residential conversions. They explore the potential impact of these conversions on the city's tax roll and housing market.
- Estimated 44 buildings (15 million square feet) in the pipeline for conversion to residential use
- Conversions could absorb about a third of the loss in office occupancy
- Tax incentives for conversions could result in a $5 billion present value tax expenditure
- Program aims to stabilize the market and produce affordable housing in Manhattan
Justin Brannan
3:50:11
Okay.
3:50:11
I want to ask about the Manhattan Class A office vacancy rate.
3:50:15
Of the many notable lagging impacts of the pandemic, one area that continues to show little or no improvement is the demand for office space.
3:50:24
Cushman and Wakefield reported 22.7% of all Manhattan Class A office space still remains vacant as of the end of FY twenty five q three.
3:50:34
We asked OMB about the we asked OMB earlier about the number of applications that the city has received so far, specifically for the office to residential conversion.
3:50:43
So are you able to speak to any of the details regarding the progress on these conversions?
Francesco Brindisi
3:50:49
Yes.
3:50:50
So we don't have access to the accelerators data.
3:50:54
We have done some research.
3:50:56
We have estimated a pipeline of about 44 buildings that would convert to residential.
3:51:04
This is a mixture of rental and condos.
3:51:08
That is probably we estimate 15,000,000 square feet of office space.
3:51:15
Of which about 12,000,000 could access the tax incentives in the short term.
3:51:22
So that's about We estimate if you take a look at the decline in occupancy for class b and c, the ones that And the ones that are not Hudson Yards and the like.
3:51:32
If you look at the decline in occupancy, this could absorb about a third of the loss.
3:51:38
It's Do wanna
Brad Lander
3:51:39
direct them to this chart in the where is this in the report?
Francesco Brindisi
3:51:43
This is a secret chart.
Kevin C. Riley
3:51:44
Oh, sorry.
Eric Dinowitz
3:51:45
The top
Justin Brannan
3:51:45
secret chart.
Francesco Brindisi
3:51:46
That will be published.
Francisco P. Moya
3:51:48
I see.
3:51:49
We will
Brad Lander
3:51:49
be sharing this information shortly, but not yet in your book.
Francesco Brindisi
3:51:52
I always have a report for that.
Justin Brannan
3:51:53
What impacts do you think the the commercial to residential conversions would have on the city's tax roll?
Francesco Brindisi
3:52:06
So most of the rest of these conversions are going to be converted to rentals.
3:52:10
And we believe most of them are going to take advantage of the $4.67 ms tax exemptions.
3:52:16
Most of the space is in Manhattan.
3:52:20
So what happens now is that these buildings are being taxed as office.
3:52:26
And they're paying something.
3:52:27
And then that amount of tax is going to drop to whatever is the 10% of the valuation of DOF is gonna put on this building.
3:52:36
So preliminarily in the secret report that soon will be published.
3:52:42
We put the price of this 12,000,000 square feet in present value at about $5,000,000,000 in terms of the tax expenditures that are associated with this building.
3:52:53
So it's more a measure of It's more a program that stabilizes the market and puts it on a more even keel than generating tax revenues.
3:53:04
So you know, we're going to lose tax revenues in part because we are buying affordability.
3:53:11
In substantial amounts, would say.
3:53:15
And in Manhattan where other programs are not able to produce housing or affordable housing.