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Weekly Market Report - February 21, 2022

*** Commercial buildings retained almost all of pre-pandemic value, NYC budget says


Mayor Eric Adams’ preliminary budget includes an estimate of nearly $301 billion for the city’s commercial properties for the 2022-23 fiscal year, Crain’s reported. While that’s below the estimated $326 billion pre-pandemic value, it still marks a retaining of 92.3 percent of their value. The estimate is also a sizable boost from last year’s of only $269 billion for the 2021-22 fiscal year, 11.7 percent below the latest estimate. Not every commercial real estate sector experienced the same boost of positivity in estimated values. Offices, retail properties and hotels still struggled to hang on to their value against the weight of the pandemic. The preliminary budget shows office properties have lost 7 percent of their value in the last two years, dropping from $172 billion to $160 billion, according to Crain’s.


Retail properties have declined 11.9 percent, from $63.8 billion to $56.2 billion. Hotels were hardest-hit as many were forced to shutter after tourism dried up in the early days of the pandemic. The properties still have a long road to recovery ahead, as their estimated value declined a whopping 19.6 percent, from $32.7 billion to $26.3 billion. Overall, all properties in the city were valued at $1.4 trillion, 2.1 percent above pre-pandemic levels. Tax revenue growth was projected at $726 million based on higher-than-expected property tax values.


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Mayor Eric Adams calls out NYC workers to return to offices


Mayor Eric Adams called Thursday for people to revive the state’s economy by getting “back to work” — and said he was tired of hearing excuses about the COVID-19 pandemic. Adams said that white-collar workers who continued working from home were hurting service-oriented businesses that rely on a steady stream of customers. Adams also appealed to New Yorkers’ civic pride, saying: “It’s time to open our state and our city and show the country the resiliency of who we are.” But Adams made only an oblique reference to leading Democratic state legislators’ opposition to his plan to stem the surge in crime by toughening the state’s controversial bail reform law.


On Monday, Adams acknowledged a lack of progress after meeting with lawmakers in Albany, saying, “If I am not getting the things I laid out … I still have an obligation to keep the city safe.” But the next day, Adams lashed out at the media over news coverage of his failed trip and suggested he wasn’t being treated fairly due to racial bias because “I’m a black man that’s the mayor but my story is being interpreted by people that don’t look like me.” On Wednesday, Senate Majority Leader Andrea Stewart-Cousins (D-Yonkers) confirmed during a radio interview that legislators had rejected Adams’ plan to amend the bail law, saying that it’s “not … the actual answer” to the problem of surging crime.


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Big Tech Makes a Big Bet: Offices Are Still the Future


Big tech companies like Meta and Google were among the first to allow some employees to work from home permanently, but they have simultaneously been spending billions of dollars expanding their office spaces. Companies, real estate analysts and workplace experts said several factors were propelling the trend, including a hiring boom, a race to attract and retain top talent and a sense that offices will play a key role in the future of work. In the last three quarters of 2021, the tech industry leased 76 percent more office space than it did a year earlier, Big Tech executives say that office expansions are to be expected and that modernized buildings will probably be spaces for people to collaborate rather than stare at screens.


Meta, the parent company of Facebook, leased 730,000 square feet in Midtown Manhattan in August 2020, and has added space in Silicon Valley as well as in Austin, Texas; Boston; Chicago; and Bellevue, Wash. Salesforce is moving forward with four new office towers planned before the pandemic, in Tokyo, Dublin, Chicago and Sydney, Australia. The company said last February that many employees could be fully remote, but shifted its messaging months later, saying that “something is missing” without office life and urging workers to come back in. Office vacancy rates in San Francisco climbed to 22.4 percent at the end of 2021 from 21.5 percent in the third quarter of the year. The city’s economists called tourism and office vacancies “special areas of concern in the city’s economic outlook.”


In New York, office vacancy rates declined to 14.6 percent, but areas dependent on office workers to power local businesses, like Midtown Manhattan, are recovering more slowly. By contrast, the largest tech giants “have so much money that it doesn’t matter,” said Anne Helen Petersen, a co-author of “Out of Office,” a recent book about the remote-work era. Because of their huge budgets, Ms. Petersen suggested, such companies can continue constructing offices without worrying about how much money they stand to lose if the buildings become obsolete.