June 14, 2025
Let’s talk about NYC’s office space problem. Since COVID, the city’s commercial real estate market has been struggling to find its footing.
We’re seeing major vacancy issues, especially in older office buildings that just don’t cut it anymore in today’s market. Class B and C buildings are being left behind while tenants flock to shiny, amenity-rich towers like those in Hudson Yards.
Vacancy rates in Manhattan were about 11% back in 2019. Fast forward to the end of 2024, and we’re still sitting at over 22%.
The city projects that number will only dip to around 18% by 2029. That’s not exactly a sign of confidence for building owners—or brokers trying to lease them out.
In response, the City is rolling out a new idea: the Relocation Assistance Credit for Employees (RACE). It’s a tax credit aimed at incentivizing companies from outside the state to lease space in NYC’s older commercial or industrial buildings—specifically those built before 2000.
If passed, companies could receive up to $5,000 per relocated employee for up to 10 years, with a cap of 500 workers per business.
As a broker, here’s the reality: owners of older office buildings are stuck. High interest rates make it hard to finance renovations, and many loan agreements won’t even let them lower rents to stay competitive.
That leaves a huge chunk of commercial inventory sitting empty and underperforming.
RACE could be a helpful tool in getting tenants back into these spaces. But it’s not a magic bullet. Like other tax incentive programs NYC has tried, it could fall short of expectations.
That’s why it's smart that this is being proposed as a pilot program with review requirements. It gives us a chance to test the waters without fully diving in.
Should NYC race to fill these buildings? Yes—but with caution. Empty offices don't just hurt landlords. They eventually drag down property values and shrink the City’s tax base.
Property taxes are the backbone of city services—so when landlords start defaulting or appealing assessments, everyone feels it.
RACE isn’t the only solution, but it’s one piece of a larger strategy. Between this program, office-to-residential conversions, and incentive packages to modernize buildings, NYC is throwing everything at the wall to keep its commercial market afloat.
We need more tenants, and if RACE helps landlords keep the lights on in older buildings, it’s worth exploring. But we also need transparency and accountability to make sure the cost matches the benefit.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
