city says

properties still increased year over year. Retail properties were worth $56.1 billion for fiscal year 2022–23, and hotel properties were worth $25.9 billion, according to the department.

Overall, the agency valued the city’s commercial buildings at about $317 billion, roughly a 7.4% increase from fiscal year 2022–23, when they were valued at about $295 billion, but still down from their prepandemic valuation of $326 billion. Thus, commercial buildings have retained about 97.3% of their value.

Commercial property taxes represent an enormous component of the city’s budget, and they are based largely on the city’s calculations of the worth of those buildings. Higher property valuations are better for the city’s tax coffers, although property owners can appeal their values to the Tax Commission if they disagree with them. But it’s in the city’s best interest to record high valuations for as long as possible.

Elizabeth Brown, communications director at the Independent Budget Office, said the length of retail leases likely has helped prop up the value of buildings in the sector, similar to what is happening with office buildings.

“Office and retail tenants in particular are still paying rent, which is helpful, and this might have a lot to do with the long-term nature of commercial leases,” Brown said. “Even if people are working from home, the leases are still being maintained.”

Leasing newer, nicer office space

Campion noted that there is evidence of the “flight to quality” trend for office buildings, a phrase commercial landlords have used to argue that companies are interested in leasing newer, nicer office space. The values of the city’s trophy office buildings have declined by much less than the values of its older office buildings, he said.

But the fact that commercial buildings are close to their prepandemic values does not necessarily indicate that the sector has fully recovered, said state Deputy Comptroller Rahul Jain. Landlords typically want the values of their buildings to increase, after all, not stay flat.

“Comparing these percentages to the prepandemic market peak makes the comparison look better than if you were to compare them to the levels expected prior to the pandemic,” Jain said. “It will likely still be some time before we are all the way back to that prior trajectory.” ■