Tenants in the office space business have been giving brokers a 50/50 chance of coming back into the office after Labor Day. While brokers still have a long way to go, they are seeing that there is an upward trend happening. SL Green reports a rent collection front of 91 percent. The next few quarters will be difficult; however, brokers believe they can get through it. The real estate investment trust’s goal to build up a “substantial liquidity buffer to help weather uncertain economic environment” was reached by June with the help of big sales happening in the city. One deal was the sale of a 49.5 percent stake in One Madison Avenue to Hines and the National Pension Service of Korea, and the $170 million sale of a retail condo at 609 Fifth Avenue.
An analysis of quarterly earnings done by Reuters found that more than 25 large companies across different sectors are planning to downsize their current office footprint. After the pandemic triggered state shutdowns in March, workers across the country transitioned to working from home, which many companies have reported to be a largely positive experience. In June, Morgan Stanley said that remote work would increase vacancy rates in office buildings going forward. Vacancy rates are expected to reach 10 to 12 percent in New York in the next two to five years, and they are up from 8.7 percent now.
Disputes between commercial tenants and landlords will now be handled at OATH, the Office of Administrative Trials and Hearings after the Department of Small Business Services (SBS) couldn’t handle the volume of cases. Councilmen’s agree that this was a good move as the SBS were never equipped to handle this as they would bring in outside professionals and resources to handle the claims. OATH is not looking to punish small businesses and would rather work and educate the business owners during this pandemic.
With the real estate market taking a hit from this virus, property tax forecasts, which account for more than 40 percent of city tax revenues, are being downgraded for the next four years. Total tax revenues are expected to slide by 3.7 percent between this year and the next when revenues most likely will bottom out at $93.1 billion. The Independent Budget Office said it will take about two years to recover the $99 billion from pre-pandemic level. The IBO reduced its 2020 property tax projections by $273 million since its first forecast in January. They also say that property taxes will continue to grow as it is keeping the crisis from being much worse. While property values fall, the city will still benefit from positive property tax growth. For 2021, the agency is reducing its property tax revenue by $370 million as the fiscal year had several good months before the pandemic hit.