Comptroller Report Shows Tax Revenues Exceeding Expectations Despite Remote Work Shift
Surprising Market Resilience
New York City’s office market has outperformed pessimistic “doom loop” predictions, with property values and tax revenues exceeding expectations despite widespread remote work adoption, according to NYC Comptroller Brad Lander’s November 2025 analysis. The market’s resilience contrasts sharply with other major U.S. cities, positioning New York as a relative winner in the post-pandemic commercial real estate landscape.
Tax Revenues Beat Projections
Office property tax levies for fiscal years 2025 and 2026 tracked closely with the Comptroller’s optimistic scenario rather than the pessimistic “doomsday” forecast developed in June 2023. While rents remain depressed–down nearly 35% from year-end 2019 after adjusting for inflation–rising property values driven by market upscaling have maintained tax revenue flows. The report from the NYC Comptroller’s Office demonstrates how New York avoided the predicted downward spiral where reduced tax base would lead to service cuts, compromising quality of life and driving further exodus.
K-Shaped Recovery Pattern
The office market has experienced a “K-shaped recovery” with high-end properties strengthening while lower-tier buildings continue struggling. Manhattan’s Central Business District availability rate fell from 18% in mid-2024 to roughly 14% currently, outpacing the nationwide rate of 15.7%. However, approximately 75 million square feet or 15% of all 1-4 star office space in the CBD remains available for lease. The volume of vacant lower-tier space exceeds the total amount of premium 5-star space in the entire district.
Upscaling Drives Valuation Growth
The paradox of rising valuations despite high availability rates reflects substantial new supply added at the high end and a shift in occupied space from lower-tier to higher-tier buildings. For 5-star properties in Manhattan’s CBD, occupancy has increased in each of the past four fiscal years, while lower-tier property occupancy has fallen annually. This “upscaling” of the city’s office inventory has driven growth in both office valuations and tax levies.
Challenges Remain
The overhang of unused lower-tier office space remains substantial, with roughly 67 million square feet of vacant 1-4 star space in the CBD. At the current conversion rate of approximately 1.6 million square feet annually to residential or other uses, reducing this inventory would take decades without significant pickup in demand. The recent upward trend in leasing across a broad range of building classes provides encouragement, though future trajectories depend on economic outlook, workplace dynamics, and artificial intelligence’s impact on office employment. As Mayor-elect Zohran Mamdani prepares to govern, the office market’s relative health provides fiscal stability but also highlights inequality concerns as lower-tier space languishes while premium properties thrive.
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