New York City’s office market value has exceeded its pre-pandemic level even as the vacancy rate sits at a record high, according to a new study.

The total assessed value rose 4.4% to $205 billion in fiscal year 2025 from $196.2 billion in fiscal year 2020, based on a study by New York State Comptroller Thomas DiNapoli’s office, which calculated its market and taxable billable value data mostly from the city’s Department of Finance records. Total taxable billable value rose 7% to nearly $72 billion between fiscal 2020 and 2025, the report said.

Office buildings are an outsized contributor to New York City’s economy as their market value affects tax revenue, according to the study. Commercial real estate, with offices making up the largest share, accounted for 22% of all property market value in the city as of fiscal year 2025.

Growth in office market value wasn’t driven by traditional midtown Manhattan clusters, the study said. Midtown East, Grand Central and Times Square areas all saw their respective values decline since fiscal year 2020.

The expansion instead was led by a $6 billion, or 56%, increase in value of the Hudson Yards market on Manhattan’s far west side, which alone represented about 70% of the total growth, according to the report.

Growth in Hudson Yards is “humongous,” Rahul Jain, New York state’s deputy comptroller, said in an interview, adding new buildings such as Related Cos.’ 30 and 50 Hudson Yards, Brookfield’s One Manhattan West, and Tishman Speyer’s Spiral are helping to drive the increase. “We are seeing leasing in those buildings. Tenants they are bringing in are large conglomerates like Pfizer and BlackRock. … We are seeing some shift to Hudson Yards [from traditional office clusters.]”

While growth in Hudson Yards has been driven by new buildings, Jain told CoStar News smaller buildings in the area also are seeing a boost in value.

Among other bright spots, office market value saw 19% growth in Union Square as well as a 28% jump in SoHo, according to the study. Outside of Manhattan, major market value drivers included nearly 20% growth in downtown Brooklyn and the Dumbo area, and a 65% jump in Long Island City in Queens. New York’s office buildings are still concentrated in Manhattan below 59th Street, representing nearly 90% of office market values.

“The value of office buildings in New York City is tied to demand for space that comes from new and expanding businesses hiring workers,” DiNapoli said in a statement. “Demand for space in new, amenity-rich buildings in and around Hudson Yards, along with the firm growth around Union Square, the Village and business districts in the outer boroughs have helped increase market values, which ultimately will remain a key contributor to the city’s tax rolls.”

In a sign of the flight-to-quality trend of employers seeking new or renovated properties, the study found that newer office buildings constructed after 2010 led the city’s office market value growth. Development of newer office buildings in Hudson Yards and other areas drove market values up as they generally have more amenities, the comptroller’s office said.

“The sky is not falling,” Jain told CoStar News. “On standalone deals and buildings there’s some weakness in traditional districts and office buildings. … Vacancies are higher in older buildings in traditional business districts. [But] there are enough new buildings that offset that.”

The increase in market value aside, the study said New York’s office market still faces challenges, including the office occupancy rate still remaining “well below” pre-pandemic levels by different metrics. Many companies continue to reevaluate their space needs, with some having cut their office footprints to lower costs or to “gain amenities,” according to the study. The office vacancy rate in Manhattan rose to nearly 24% in the second quarter, the highest level on record, from about 11% in the fourth quarter of 2019, the report found, citing Cushman & Wakefield data.

“The city’s historic business districts will face a longer road to recovery if office occupancy rates do not improve,” the comptroller’s office said. “Despite these challenges, property values for offices have not yet seen the major correction in valuations that some researchers have suggested, of nearly 50 percent decline in long run values.”

In fact, while office market value has topped the pre-pandemic level, Jain said the growth rate has slowed. While the city’s office buildings saw an annual average value growth of 6% to 7% pre-pandemic, it’s slowed to under 1.5% annually since. Without the impact of the pandemic, the city would have gotten $6.2 billion more in office property tax revenue combined in the past four years. In contrast, the city is expected to get $7.6 billion this coming fiscal year, which started July 1.

A separate study by the Department of Finance released earlier this year also found the office sector’s market value, led by trophy buildings, has actually gone up despite pandemic-driven challenges and the pervasive hybrid work pattern. Some industry professionals said at the time the department’s market value data, which affects how buildings are assessed and taxed, may have used building owners’ outdated income and expense reports.