New York has proposed zoning and other regulatory changes that could make it easier to convert underused office buildings for residential use and produce new housing for the first time in decades in an area spanning about 42 blocks just south of Times Square in Manhattan.
The Midtown South Mixed-Use Plan would update zoning in four areas designated for manufacturing a half-century ago and allow new housing to be built between 23rd Street and 40th Street from Fifth Avenue to Eighth Avenue in Manhattan, New York City Mayor Eric Adams and New York City Department of City Planning Director Dan Garodnick said in a statement on Thursday.
The city also is proposing zoning changes that would make office buildings built before 1990 eligible to be converted to housing, compared with the existing 1961 and 1977 cutoffs in various areas, and allow offices and other nonresidential buildings to be redeveloped as housing anywhere where housing is permitted under zoning, the city said.
These and other plans expand on what Adams’ office said earlier this year as the city targets office-to-residential conversions to produce as many as 20,000 housing units over the next decade. The city previously highlighted Manhattan’s Midtown South as an area ripe for updated zoning with office-to-residential conversions a key part of reinvigorating business districts and becoming a 24/7 livable community, similar to how past zoning changes sought to make lower Manhattan a vibrant mixed-use neighborhood.
To be sure, many real estate executives have said plans to turn office buildings into residential properties in New York and around the country face challenges. Some office building layouts are not suitable for residential conversion and the costs can be prohibitive.
The proposals come as the pandemic-driven hybrid working trend, coupled with uncertainty about the economy that has led companies to cut back on their space needs, has hit the city's office market hard. Manhattan’s office availability rate in July stood at a record high of 17.8% as the available supply has grown by 78.9% since March 2020 to a record-high of 96.36 million square feet, according to a study by brokerage firm Colliers. Total sublet inventory also has jumped 79% since March 2020, when the pandemic made remote working a common practice.
Meanwhile, the city’s apartment market asking rent per unit has topped $3,000, a record high, according to CoStar data.
“Office-to-residential conversions, which, if done well, can enhance New York's long-term competitiveness by adding much needed housing," Ana Champeny, vice president for research at the Citizens Budget Commission, a nonprofit organization that studies the finances of both the city and state, said in the statement from the mayor’s office.
Leasing activities have shown corporate tenants often desire bustling neighborhood locales to attract talent and bring employees back to the office. For instance, Verizon signed a lease to become the anchor office tenant in the mega mixed-use Essex Crossing development on Manhattan’s Lower East Side, an area packed with restaurants, bars and entertainment options.
“In Flatiron and NoMad, we have seen how the combination of a thriving residential community, office-based companies, and a diverse range of ground-floor businesses create a vibrant 24/7, mixed-use district,” said James Mettham, president of Flatiron NoMad Partnership, a business improvement district that covers the area surrounding the iconic Flatiron Building.
Cheering the latest proposal is the business improvement group representing the Garment District, created for the apparel industry nearly 100 years ago and located between the Penn Station and Port Authority Bus Terminal transit hubs. Hard hit by the pandemic, it’s also among neighborhoods the state is helping to revitalize and transform.
The city’s announcement “is an important step in the development of the Garment District as a more vibrant, mixed-use community,” Barbara Blair, president of the Garment District Alliance, said in the statement, adding the area’s close proximity to major transportation hubs, restaurants and office space makes it prime for residential development.