New York is offering help to fund renovations of what it calls “underperforming” office property that the city said accounts for more than half of Manhattan’s inventory as the top U.S. commercial real estate market struggles with what CoStar data shows as record-high office vacancy rates.
Building owners seeking overhauls of aging office buildings located south of 59th Street in Manhattan may get tax incentives including property tax abatement for up to 20 years and a tax exemption on construction materials through the new Manhattan Commercial Revitalization Program, the New York City Economic Development Corporation and the New York City Industrial Development Agency said.
Over 255 million square feet of Manhattan’s 450 million square feet of total office space is “underperforming,” NYCIDC and NYCIDA said, adding the program aims to target “transformative” projects of up to 10 million square feet.
The move also comes as hybrid work preferences coupled with rising interest rates have slowed investment in the office sector and created "immediate challenges facing New York City’s commercial business districts," according to the statement.
“Every office sitting empty means less funding for everything from schools and affordable housing to emergency food and police officers,” New York Mayor Eric Adams said in a statement. “There is real demand for the newest, highest-quality office space — and having more of that in New York City means bringing more employers to our city.”
Manhattan generates 58.5% of the citywide office and retail property tax revenues, and 45% of all jobs in the city, NYCEDC and NYCIDA said. Some 13.6% of the city’s office space remains vacant with aging and outdated office buildings “increasingly struggling to retain tenants and to sign new leases” versus higher-quality office spaces.
Leasing activities in the city and across the country have shown renovated or new office properties faring better in landing employers seeking to attract and keep talent and bring them back to the office.
The program also involves incentivizing owners to undertake investments and retrofits that will make sure buildings comply with Local Law 97, which will subject most buildings over 25,000 gross square feet that exceed carbon emissions limits to annual fines beginning in 2025.
Eligible buildings in the program, which is part of the city’s bid to turn commercial hubs into what it described as “vibrant 24/7 destinations,” also have to be at least 250,000 gross square feet in size and must have been built before the year 2000.