Owners of aging Manhattan office stock could get a break with the city offering tax abatements in exchange for updating their properties, a move the city hopes will help office landlords attract tenants and curb record-high vacancy rates.
The program — run by the New York City Economic Development Corporation(NYCEDC) and the New York City Industrial Development Agency (NYCIDA) — will allow owners of older office stock south of 59th Street to defer some property taxes if they renovate their properties. The city announced the program Thursday.
Buildings constructed before 2000 and larger than 250,000 square feet will be eligible for the program, which would allow landlords to not pay property taxes on the value of the renovations for up to 20 years.
The initiative, dubbed the Manhattan Commercial Revitalization Program, or M-CORE, will cover up to 10 million square feet of office space. The EDC hopes it will help the borough’s increasing office vacancy rate, which could threaten city tax coffers since Manhattan brings in 58.5 percent of the city’s office and retail property tax revenue, according to the EDC.
“We’ve been observing that there are elevated levels of vacancy throughout the city,” Melissa Román Burch, chief operating officer of the EDC, said. “We really saw the opportunity to introduce this tax abatement program as one of several strategies that we are pursuing to strengthen New York City’s business districts.”
Under M-CORE, owners could also score a partial tax waiver for securing a new mortgage and an exemption from paying taxes on construction equipment and materials used to upgrade eligible buildings, though landlords would still be required to pay property taxes on the original value of their assets, according to the EDC.
Roughly half of the city’s office stock, or 250 million square feet, has struggled to land tenants while companies have instead flocked to newer, pricier towers, which have seen record leasing numbers. M-CORE could capitalize on that demand and make it easier for landlords to update space and make renovations, said Franklin Wallach, Colliers’ executive managing director of research and business development.
“There is a track record of success amongst those older buildings that already invested the capital to upgrade and renovate,” Wallach said in a statement. “The M-CORE program will be a meaningful step in the Manhattan office market’s recovery from the drop in demand over the last three years.”
The EDC hopes the renovations will increase office attendance in the properties and raise their property values, estimating M-CORE could bring in between $750 and $844 million in net tax revenue gains. The agency plans to start accepting pre-applications for the program on June 8 with a deadline sometime in August.
Landlords and city officials have searched for a solution to Gotham’s glut of office space, which had an availability rate of 16.1 percent in the first quarter, and many have floated converting office properties into housing. Those projects can be difficult depending on the size, age and zoning of a building, and not every office tower is suitable for conversion.
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