New York City’s largest office REITs are struggling with the impact vacant office space is having on their portfolios and the city’s office market as a whole. SL Green, Manhattan’s largest office landlord, reported in its recent earnings report a 90.2 percent occupancy across its portfolio, which includes 25 buildings, in the first quarter of this year, a drop from 95.5 percent at the beginning of 2020. Empire State Realty Trust (ESRT) reported 90.7 occupancy for its Manhattan office portfolio in its earnings report last week. Vornado Realty Trust will soon release their own first quarter earnings reports, which will shed even more light on the health of NYC’s office market, the largest in the country. At the moment, shares of SL Green, Vornado, and ESRT are all trading close to their lowest level since the onset of the COVID-19 pandemic.
There is more than $16 billion in loans for New York City commercial properties coming due this year, a significant increase from the $12.7 billion that matured last year. Nationwide, there is close to $450 billion in commercial real estate loans set to mature this year, 60 percent of which are held by banks. Of those banks, more than two-thirds are regional banks, smaller institutions that many fear will not be able to handle a wave of defaults in the event that landlords are unable to pay off loans. Within the city’s 400 million square feet of office space, the highest quality space, like at trophy office towers in Hudson Yards and SL Green’s One Vanderbilt, is still drawing the most tenants. But a huge chunk of older buildings, many of them Class B and Class C, are not faring well. City leaders have rolled out a task force to convert empty office buildings to residential housing, which will help solve the issue somewhat, but what will happen to scores of other properties is something the industry and lawmakers are still trying to figure out.