By Joel Marcus, senior partner, Marcus & Pollack LLP COVID-19 and the government-ordered shutdown had immediate negative consequences for all types of real estate, and New York City’s tax valuations took this into account. Damage from the pandemic still weighs down property values today, compounded by cultural shifts that sapped demand for commercial properties. Fair market values have evolved to reflect pervasive vacancy, building obsolescence and the heightened cost of serving tenants that have abundant alternatives to choose from. At the same time, work-from-home practices reduce space requirements. Retailers, restaurants and hotels see half the foot traffic they once had from nearby office buildings, adding to ongoing pressure from e-commerce and other challenges to create excess vacancy, constrained rental streams and declining market values. Valuation for property taxation has not evolved, however, judging by the revaluation tax assessments the city’s Department of Finance is issuing. Revaluations ostensibly update taxable property values to current fair market value. Yet New York’s assessors habitually inflate valuations by applying pre-pandemic rental rates and vacancy assumptions, ignoring the rents landlords are actually collecting today and turning a blind eye to fundamental changes in demand for commercial space. Old thinking persists among these assessors, and it …
