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NYC Government Leasing Costs Jump 40% Since 2014

NYC Government Leasing Costs Jump 40% Since 2014

(Bloomberg) -- New York City will spend $1.2 billion this fiscal year leasing offices in private buildings, an expense that’s growing faster than the overall city budget and office rents, according to the Citizens Budget Commission, a nonprofit fiscal watchdog.

Between 2014 and 2018, “lease costs grew 40 percent, far greater than the 20 percent increase in the city budget, the 12 percent increase in asking rents for office space, and the 10 percent increase in the number of full-time city employees,” the CBC said in a report released Wednesday.

The city Human Resources Administration, which provides services to the poor, pays $206 million on rent citywide, second-most among city agencies. Its offices include a 582,000 square-foot, 14-floor executive headquarters at 4 World Trade Center featuring floor-to-ceiling windows, 200 meeting rooms and a 45-seat auditorium.

That location houses 2,400 employees, according to administration spokeswoman Laura Feyer. The city paid $38.8 million last year for the lease, according to the city comptroller’s office.

“In the aftermath of the devastation of the September 11 attacks, as part of revitalizing the rebuilding of the World Trade Center complex, the prior administration determined” that the welfare agency would be one of the “initial tenants,” Feyer said in an email.

While the cost per square foot is in line with a lower Manhattan office market with asking rents averaging about $66.75 per square foot, it’s higher than most spaces rented by city agencies, said Sean Campion, a senior research associate who authored the report for the business-funded group.

The decision to rent space in the World Trade Center site was made during the administration of former Mayor Michael Bloomberg -- part of an agreement between developer Larry Silverstein, the city and state of New York, and the Port Authority of New York and New Jersey to stabilize financing of the building during construction. The former mayor is founder and majority owner of Bloomberg News parent Bloomberg LP. The lease runs until 2030, Campion said.

The CBC criticized the city for not publishing leases’ costs per square foot. “Without the quantity and cost of space leased at each property, the public cannot determine how efficiently it is used or examine what drives rapidly increasing lease costs,” the report said.

To contact the reporter on this story: Henry Goldman in New York at hgoldman@bloomberg.net

To contact the editors responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net, Michael B. Marois, Elizabeth Campbell

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