The commercial real estate market in New York City has not been great since the COVID-19 pandemic and is not done struggling yet, a recent New York Times article indicated.
“If we think it’s bad now, it’s going to get a lot worse,” were the ominous words from an attorney who works in the commercial mortgage industry.
Property values have dropped significantly in the last four years for commercial real estate creating a few issues that include the loss of property tax revenue which leads to empty office buildings and restaurants that rely on the workers who are spending more time working from home.
The NYC market is seeing several large buildings with lots of vacant space facing foreclosures or sales for dramatically reduced amounts. The Times quoted data from Trepp about delinquency rates for office building loans up 7 percent in May. Trepp data also revealed that 30 buildings in major United States cities including Dallas, New York, San Francisco and Washington D.C. were in foreclosure, more than double from early 2023.
Examples of dramatically reduced sales prices mentioned in the article include 1740 Broadway, a New York building that fetched $605 million in 2014 but was sold for less than $200 million in spring. Another building in Washington D.C. sold for $16 million this spring after being valued at $72 million in 2018. Chicago saw a building that sold for $4 million in late 2023 after fetching $51 million in 2012.
Reflecting the theme of the article, commercial real estate experts are still waiting for the bottom of the market to fall out. One expert quoted in the article says it will take until later this year or 2025 before the market realizes just how big of a hurdle they face.
Dave Lubach is executive editor for the facility market.
