What is going on with 2023/24 NYC property assessmens?
OnJanuary 17, the New York City Department of Finance published itstentative property tax assessment roll valuing all real estate in New York Cityas of the January 5, 2023 "taxable status date." The final assessmentroll will be published on May 25 and will affect property taxes due for thecity's 2023/24 fiscal year (July 1, 2023 - June30, 2024).
As a city whose core industries onceattract- ed an influx of more than one million daily commuters into its centralbusiness districts, New York City has suffered as those workers have lagged inreturning to their offices. The latest surveys do not anticipate Manhattanoffice occupancy to break the high 50% range even by the end of 2023. Thischange in the way we work has had an undeniably negative impact on real-worldmarket values of com- mercial real estate assets such as office build-ings. Retail properties, too, have suffered, as those tenants have long reliedon foot traffic from office workers. Higher interest rates and tighter financing markets have also not helped the situation. Meanwhile, othercity economic sectors that were absolutely ravaged early in the pandemic, liketourism and residential real estate, have begun to recover since 2020.
Where does that leave us vis-a-visreal prop- erty assessments in 2023/24? In 2022/23, we saw increases in nearly all assetclasses and subclasses from 2021/22 pandemic-induced lows. In 2023/24, we see more mixed results. Overall, citywide market valuesincreased by 6% from 2022/23 to $1.479 trillion - higher than before the pandemic. Muchof that was due to increases in values of one-, two- and
three-family homes (8.27%) andcommercial properties (7.37%), while the city-held multi- family residential properties (including rentals, condos and co-ops) wererelatively flat.
Parsing the data further,we see some confus- ingyear-over-year trends. Manhattan office buildings increased in value by almost7% to a total valuation of $128billion, just shy of theirpre-pandemic 2020/21 valuation of $133 billion, despite low occupancy andominous signs. Manhattan retail values increased by almost 8%, despitelackluster leasing activity. Meanwhile, Manhattan multifamily values dropped by1.5% (with rental buildings de- creasing in value by 3%), despite residentialrents being higher than ever before.
Whyare the valuations of some asset classes moving in opposite directions tothe real- world market conditions? It could have to do with the lag timebetween reported financial results and assessments. For property types like office and retail, statements likelyreflect- ed pre-pandemic longer-term leases that were still in place during 2021, whereas the residentialproperties likely reflected a rental market that was still negatively affectedby COVID-19-induced tenant turnover.
The long-term effects of the pandemicon the valuation of real estatein New York City have yetto be fully realized. Barring anoth- er COVID-19-like event, it is likely thatin 2024/25 and later, as properties' financial
results become more reflective of longer-termmarket trends, we will see corresponding trends in valuation within each assetclass.
