While the value of commercial buildings in NYC continues to fall, multifamily housing has grown in value among investors in New York City as rents have reached pre-pandemic levels. Office-to-residential conversion projects are on the horizon, and they have the potential to have long-lasting positive impacts on the city.
Just as 9/11 fundamentally changed Lower Manhattan, Covid is affecting Midtown in ways that we won't fully comprehend for some time. Developers converted office buildings into residences as New York recovered from the 9/11 terror attacks, and with the aid of government financial incentives, they managed to entice tens of thousands of new residents to Lower Manhattan. The once-dark neighborhood became a flurry of office employees, parents pushing strollers, schools, and eateries after 5 o'clock.
Conversions may revitalize Midtown, where local businesses have suffered from a lack of commuters, leaving empty storefronts and decay in their wake. The neighborhood's ability to attract new businesses and retail tenants would increase with the addition of new residents, who would eventually support quality-of-life upgrades like larger sidewalks and public parks.
New York City requires operable windows, minimum levels of natural light, and ventilation in each livable room in residential buildings. Typically, the depth on either side of a core elevator in a residential skyscraper is 30 feet. Modern office buildings, on the other hand, frequently lack operable windows and have wider floor plates to accommodate corporate tenants. The distance between the edge and the center may be 45 feet or more. The question of what to do with all that internal space devoid of windows is a key challenge for designers.
One way to get around the window requirement is to section off an inside space and label it a "home office". But it's far from perfect. Everyone wants windows. Elevators are another problem. The number of elevators in office buildings to handle heavy traffic in the morning and evening would be overkill for a residential building.
Some buildings are off limits because they are landmarked or because they are located in areas where residential buildings are restricted. The latter is a holdover from a previous age when planners sought to keep homes away from the noise and pollution of manufacturing in places like the Garment District. Since then, the mixed-use "live-work-play" area has become the ideal promoted by developers.
Then there is the question of vacancy. Some of the bigger conversions of recent years have involved office buildings that were empty or nearly so. But if tenants must first be removed, that can become a costly ordeal.
All the buildings below 96th Street were ranked using artificial intelligence based on a set of conversion criteria by developer Silverstein Properties. It found 323 suitable buildings out of the roughly 2,500. Silverstein could create 10,000 to 15,000 additional housing units in those 323 buildings over the next seven or eight years – a mere fraction of the 500,000 new homes Mayor Adams has promised to construct during the following ten years.
Downtown has been the best terrain for conversions. Many of its buildings pre-date the invention of air conditioning, and they frequently have smaller floor plans and operable windows. Compared to Midtown, the underlying real estate is less pricey. Moreover, more downtown buildings are eligible due to a zoning anomaly.
The most lenient regulations apply to conversions of buildings constructed before 1977. The cut-off in Midtown is 1961. The city's office adaptive reuse task committee recommends a new universal 1990 date, calculating that it would increase the amount of eligible office space by 120 million square feet.
Office-to-residential conversions are a "lemons-to-lemonade" strategy for New York City officials to address the persistent housing crisis on a tightly controlled island where new development is notoriously sluggish and expensive. Because of the severe scarcity, the typical monthly rent for a Manhattan apartment rose by 15% from the previous year to a record $4,097 in January.
Conversions are the highest priority for a panel to create a "new" New York City, which Mayor Eric Adams established last year. To speed up conversions, the panel suggested tax incentives and zoning reforms. Adams stated at a conference of civic leaders in January that "the demand for housing is severe, and the potential given by underutilized office space is plain – we know what we need to do."
Other plans to expedite the construction of homes in New York have also been unveiled by the mayor. Investors have been waiting for a fire sale of troubled office buildings that always appears to be only a quarter away since the start of the epidemic. The city's primary incentive to promote the development of rental housing, the 421a tax abatement from the 1970s, ended last year. Some opposed claim it benefitted developers who were already affluent without providing adequate affordable homes. Although it would require the approval of the state legislature, Mayor Adams and New York Governor Kathy Hochul have vowed to work for some form of replacement.