State Approves Downtown Tax Abatement
By Katie Hinderer of GlobeSt.com Tuesday, April 03, 2007 - NEW YORK CITY
The New York State Legislature has approved another three-year extension of the Commercial Revitalization Program. The bill was originally passed in 1995 and has been renewed three times now, and offers a $2.50-per-sf tax abatement to building owners in pre-1975 buildings in Lower Manhattan. Tenants in these buildings see the savings directly in lower rents.
Eric Deutsch, president of the Alliance for Downtown New York Inc., tells GlobeSt.com that the program has been extremely important in the development of downtown over the last decade. The bill was originally introduced in 1995 after the economic down turn to provide businesses an incentive to stay or come downtown. The bill was renewed for the second time just after 9/11, which Deutsch says really aided in the redevelopment of the area.
“I think it is very important that Downtown continues to receive favorable treatment as its transportation and other infrastructure improvements still need to be fully realized in order for the market to be squarely where we all believe it is going,” Grubb & Ellis’ Joe Harkins tells GlobeSt.com. “The state was properly guided with regard to keeping this in place.”
The bill provides incentive for Midtown businesses to move south but is also encourages owners to maintain their property as office space. Deutsch tells GlobeSt.com that the Downtown market has as much office space to residential development in the last couple years as it lost on 9/11. In addition to a number of residential projects getting off the ground, especially in 2006, there were a number of office transactions. Deutsch says over 120 businesses have moved into Lower Manhattan since 2005. Some of the largest leases were signed for space at Silverstein’s 7 World Trade Center, with Moody’s Corp. taking 600,000 sf on 15 floors, which Harkins says was transformational to the whole area. But this leasing activity has not continued into 2007. Harkins says that during Q1 roughly 8.9 million sf of deals were completed throughout Manhattan with just less than 900,000 sf of that coming in the form of Downtown deals.
Deutsch and Harkins agree that incentives like the Commercial Revitalization Program help to put Downtown into the minds of tenants, especially those looking for another option than the high Midtown rental rates. Deutsch says the tax abatement also encourages tenants to ride out the construction wave that is currently transforming the area, which can be a deterrent to relocating south.