How Manhattan’s Fiscal Problems Have Affected the Office Market

  • December 20, 1977
  • • Written by: John Robert White, CRE

Winter 1977, Vol 2, No 2

Abstract: Manhattan’s office market reached an historic high in 1969-70 but declined precipitously thereafter as a result of oversupply and demand retrenchment. Corporate relocation intensified, mainly because of the tax burden but also because the typical urban problems afflicting New York and other major cities. The 1974-75 recession and the revelation of New York City’s fiscal mismanagement in 1975 dealt a cruel double blow to the economy and to the office market. Looking Back, the author finds that fiscal instability and overspending were the principal reasons for the demise of the office market. Recovery is now evident as the city adopts measures designed to insure a break-even budget and as the national real estate recovery continues. The cutback in demand for office space may have resulted primarily from extraordinarily high taxes, but the advantages of agglomeration nevertheless are clear: there is no substitution for a commercial hub. However, for cities as New York to compete more effectively, land values should be reconstituted as a smaller component of development costs.