Prior to Monday's passage of A10241/S7135, office and retail tenants would have had until this Wednesday to commence leases that would qualify for the tax abatements. The legislation extends that eligibility period to March 31, 2014, and the benefit period from March 31, 2016 to March 31, 2020. Additionally, the time period in which tenant improvements to eligible premises must be made has been extended from Sept. 30, 2010 to Sept. 30, 2014. The legislation also extends the benefit period for the commercial rent tax reduction from March 31, 2015 to March 31, 2020.
In a statement, Elizabeth Berger, president of the Alliance for Downtown New York, says that passage of the tax abatement extension is "a significant mechanism for business attraction and retention in Lower Manhattan. As our region continues to weather the lingering recession, it is particularly critical to provide tools for growth and vitality in commercial areas, and today's action does just that." Berger had advocated for passage of the measure.
According to the city's Department of Finance, CRP was implemented in 1995 to increase tenant occupancy in office and retail space Downtown, and to reduce building obsolescence "by encouraging investment in older commercial space or conversion to residential use." Under CRP, the Department of Finance offers a real estate tax abatement of $2.50 per square foot for commercial tenants moving into pre-1975 properties. The abatement is available for up to five years; subleases and relocations from the outer boroughs are not eligible.
CRP is one of a number of incentives programs available to commercial tenants and/or property owners, according to the Downtown Alliance. For tenants relocating Downtown from outside the city, the Lower Manhattan Relocation Employment Assistance Program provides a $3,000 tax credit per employee, per year. In a separate program, there's also a sales tax exemption on the purchase of goods for office build-outs.
The Industrial & Commercial Abatement Program, which took effect in 2008, provides owners and developers a partial exemption from or abatement of property taxes for up to 25 years for eligible industrial and commercial buildings south of Murray Street. Unless renewed, the program will expire in June 2013.
Through ICAP, commercial property owners and their tenants may be eligible for benefits through the Lower Manhattan Energy Program, which is intended to reduce regulated electricity costs up to 45%. Benefits last for eight years, followed by a four-year phase-out, according to the New York City Department of Small Business Services.
For tenants taking space at Downtown commercial properties yet to be built—i.e. the World Trade Center towers—the Empire State Development Corp. offers a rent reduction of $5 per square foot. The break is only available for the first 750,000 square feet leased at the WTC, and leases must be at least five years.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
