As New York City’s office market continues its uneven recovery, a concerning disconnect is emerging between market realities and the city’s fiscal year (FY) 2025 property tax assessments. While trophy assets in prime locations show resilience, many property owners face assessments that may not fully reflect current market conditions.
The Department of Finance’s recent assessment roll shows the total market value of New York City properties increased by 0.7% to $1.491 trillion, with office values growing modestly. However, these assessments rely on data from January 2023 to January 2024 and income/expense information from 2022, creating a significant lag between assessed values and current market conditions.
This timing disconnect is particularly significant given recent market dynamics. While Manhattan’s overall availability rate dropped to 17.9% by the end of 2024—the lowest since 2020—this improvement hasn’t been consistent across property classes. Buildings constructed before 2010 have seen availability rates surge from 12.7% in Q1 2020 to 18.2% in Q4 2024. Meanwhile, post-2010 construction has actually improved, with availability decreasing from 17.3 to 15.5% over the same period.
The implications for property owners are significant. While the Department of Finance has indicated modest increases in cap rates, these adjustments may not fully offset declines in rental rates and higher operating expenses, particularly for non-trophy assets. This creates a situation where assessed values may not accurately reflect current market conditions, especially for older properties facing higher vacancy rates and decreased demand.
Property owners should consider the following key factors when evaluating their FY 2025 assessments:
1. Property age and class: Older properties face distinct challenges in the current market. Owners should ensure their assessments reflect this market reality.
2. Location premium: While prime locations maintain their value better, secondary locations may require more scrutiny of assessment methodologies.
3. Income analysis: Current income and expense data may differ significantly from the 2022 figures used in assessments. Document these changes carefully.
4. Market comparables: Recent sales data, while limited, can provide valuable evidence for assessment appeals.
5. Operating costs: Rising expenses, particularly in older buildings requiring increased maintenance or updates, should be factored into valuations.
As we move through 2025, property owners need to carefully evaluate their assessments against current market conditions. The traditional lag in assessment data, while usually beneficial to property owners, may require more active management in today’s rapidly evolving market.
Successfully navigating the assessment landscape has also grown more complex. While the historic approach of addressing assessments primarily through legal channels remains common in New York City, today’s market dynamics require deeper analytical expertise.
Property tax specialists can provide valuable insights into assessment methodologies, market-specific valuation approaches, and procedural knowledge that complement legal strategies. This comprehensive approach – combining market analysis, valuation expertise, and understanding of assessment processes – often proves more effective than relying solely on court proceedings.
This isn’t just about reducing tax burdens—it’s about ensuring assessments accurately reflect market realities, maintaining New York City’s competitiveness, and supporting the ongoing evolution of our office market. Property owners who take a proactive approach to understanding and addressing these disconnects will be better positioned to navigate the challenges ahead.
Steve Thompson is a principal in the Property Tax Commercial practice at Ryan (a global tax and software firm), specializing in commercial real estate tax appeals in the Northeast and Mid-Atlantic.
