New York commercial real estate office space may contract by 1 million sq ft.

NYT

The damage caused by the emptying of office towers and the permanent closure of many stores is far more significant than many experts had predicted early in the crisis.

The powerful real estate industry is so concerned that the shifts in workplace culture caused by the outbreak will become long-lasting that it is promoting a striking proposal: to turn more than one million square feet of Manhattan office space into housing.

Nearly 14 percent of office space in Midtown Manhattan is vacant, the highest rate since 2009. On Madison Avenue in Midtown, one of the most affluent retail stretches in the country, more than a third of all storefronts are empty, double the rate from five years ago.

Filings to erect new buildings in the city, a key indicator of industry confidence, have dropped 22 percent this year to 1,187, the lowest number since 2010.

As of late October, only 10 percent of Manhattan’s one million office workers were reporting to the office, according to a survey by the Partnership for New York City, an influential business group.

And this already bleak picture could even get worse, real estate experts and industry executives said.

“It would probably be fair to say we haven’t hit bottom yet,” said James Whelan, president of the Real Estate Board of New York.

Property taxes represent the largest source of city revenue, and commercial property accounts for the largest share of that overall levy, 41 percent, according to Thomas P. DiNapoli, the state comptroller.

Commercial property sales have plummeted by nearly 50 percent through October, according to Rahul Jain, a deputy state comptroller.

Across Manhattan’s retail corridors, asking commercial rents have dropped nearly 13 percent from last year , according to CBRE, a commercial real estate firm.