New York City’s commercial real estate market experienced a significant economic downturn during the pandemic. Many restaurants and retail shops suffered income losses, forcing them to re-examine how they do business. While some businesses quickly adapted to online ordering and touch-free delivery, more than 2,800 small businesses in New York City were forced to close down.
It could take several years before the city returns to its pre-pandemic state. In fact, some commercial real estate market sectors may never fully recover. For instance, the demand for offices could continue to fall as NYC’s office workers switch to a work-from-home model or perform more work remotely work. If this happens, the city stands to lose on property tax revenues from office buildings. NYC’s tourism grew steadily from 2010 to the early months of 2020, but quickly ground to a halt when the pandemic hit and people from other cities, states, and countries were not allowed to travel due to lockdown restrictions. NYC generated only $13 billion in tourism revenues in 2020, a 73 percent decline from 2019. NYC’s 700 hotels suffered significantly, with many distressed properties being converted into affordable housing. Despite the economic pitfalls, some areas of NYC’s commercial real estate market are slowly recovering, with several retail shops, bars, and restaurants attending to more customers than they did before pandemic-related restrictions were lifted. NYC residents who left the city are also returning and re-occupying vacant homes. Moreover, hotels that survived the pandemic are hopeful that tourists with COVID-19 vaccinations will be more likely to book rooms. In June 2021, theatergoers witnessed Broadway's reopening with Bruce Springsteen’s solo acoustic performance at the St. James Theater. Major commercial development projects that were postponed due to the pandemic are also once again in the pipeline. Technology giants such as Apple and Facebook had previously announced major expansions into Manhattan. To further propel the recovery of NYC real estate, Mayor Bill de Blasio disclosed his recovery budget of $98.6 billion. The New York State Legislature, which passed a $212 billion budget, has also allocated part of the funding to aid economic recovery as the pandemic subsides. The industrial market also remained stable despite the dollar volume per $1-million in industrial transactions falling 25 percent from $1.75 billion in 2019 to $1.35 billion in 2020. This is due in part to the average price per square foot holding its value at $445 throughout the year. And even with the decline in leasing activities, the surge in online sales demand more than made up the difference. In 2020, the multinational conglomerate Amazon signed leases accounting for 750,000 square feet for new facilities in Staten Island and Queens. Expansions and new developments led by the film industry have also helped keep NYC’s industrial market strong. Netflix, Lionsgate, Broadway Stages, Kaufman Studios, Steiner Studios, Silvercup Studios, and several production facilities and media companies have occupied many of NYC’s warehouses, bringing in premiums of as much as 20 percent for the city. Market insiders are also confident that private and institutional investors who dropped out of deals during the early days of the pandemic due to fear of losses will return for fear of missing out on value-added and secure industrial investment opportunities throughout New York City.
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AuthorA fully integrated property investment and management firm, Castellan Real Estate Partners has served the greater New York City area for more than seven years. Archives
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