New York City’s Flatiron building is one of the most iconic structures in the world — and it is also unrentable. Business Insider’s Alex Nicoll reports that the Flatiron has been nearly vacant since 2019.
Michael Cohen, a real estate veteran and managing principal of Williams Equities, says that the Flatiron, and many like it, have become “unrentable” for a few big reasons:
- Valuations have dropped due to rising interest rates, reducing owners’ equity.
- Lower leasing rates mean that owners can’t justify the costs of updates.
- Hybrid and work-from-home setups have driven office space demand off a cliff.
These mostly vacant buildings mirror a problem seen in other parts of the country we’ve seen over the past decade: abandoned shopping malls that have fallen into such disrepair they look like the sets of post-apocalyptic movies.
“Any building purchased within the five years preceding the pandemic is a zombie candidate,” Cohen told BI. “I’m being kind — it might actually be the last 10 years.”
Nicoli outlines a few viable possibilities for the resurrection of these dead structures, including conversion from offices to apartments and lenders taking control of the properties to renovate, sell, lease, or use themselves, but there doesn’t seem to be a magic bullet that can immediately rid the city of zombies.
A study entitled Work From Home and the Office Real Estate Apocalypse by economists at NYU Stern Business School, Columbia Business School, and the National Bureau of Economic Research showed that vacancy rates in NYC hit 22.2% in Q1 of 2023, and predicted that worsening as real estate prices drop.
Summarized by Shannon Thaler at the New York Post: “Lower values means less tax revenue. In the case of the Big Apple, the paper predicted a 6.5% drop by 2029. To plug the hole, cities will raise taxes and fees in other ways — making the city less attractive to live in, which means even less revenue.”
Where’s zombie slayer Rick Grimes when you need him?