Both small businesses and large corporations are vital to a city’s economic growth and stability. So what happens when a change in the economy challenges those businesses and forces them to leave.
Many businesses in New York and across the country are downgrading to smaller spaces or terminating their leases altogether. Some companies now have employees working from home and simply do not need the office space or require a smaller space. Of Manhattan’s one million office employees, only 10% reported to the office as of late October.
A change in vacancies
Commercial real estate vacancy rates
in midtown Manhattan are reaching 14% and have not been as high since 2009, according to The New York Times. Nearly one-third of all storefronts on Madison Avenue, one of the most affluent shopping areas, are empty, signifying the drastic change in the economy.
Another indicator of commercial real estate stability is the number of filings to build new buildings. This number has also dropped to 1,187, 22% lower this year and the lowest since 2010. Companies that have key retail space, such as around Central Park, have either missed rent payments or are fighting to get out of their leases, which they can no longer afford.
City officials are worried that the effects could have long-term damage, as many of the closures are permanent. They are worried that even after workers are able to return to work, they will not need as much space. This will continue to leave vacancies across the city.
The taxes from commercial real estate help to fund the city’s parks, help to clean the city and protect the streets. As sales have dropped by nearly 50%, the city is concerned about the change in financial stability.