Manhattan’s Garment District and other nearby neighborhoods just south of Times Square are on their way to potentially having dramatic makeovers after the New York City Council approved what’s billed as the city’s largest residential neighborhood rezoning plan in two decades.
The council has voted to approve the Midtown South Mixed-Use Plan to rezone about 42 blocks just south of Times Square to add over 9,500 housing units, including over 2,800 permanently affordable residences.
The proposal, led by the city’s Department of City Planning, involves building housing in four distinct areas, roughly between 23rd and 40th streets and Fifth and Eighth avenues, that “was largely saddled with industrial zoning that prohibited new housing and stymied opportunities for growth,” New York Mayor Eric Adams’ office said Thursday in a statement.
While Midtown South has long been “a powerful economic center” that’s “home to over 7,000 businesses and 135,000 jobs” and near such transit hubs as Penn Station and the Port Authority Bus Terminal, the neighborhood has struggled since the pandemic with commercial vacancies and restrictive zoning rules that limit housing, Adams’ office said.
The council’s approval comes after its Subcommittee on Zoning and Franchises and Committee on Land Use last week voted to approve a modified plan that cut about 200 housing units from the plan previously OK’d by the Planning Commission that would have involved about 9,700 units.
The plan also will be accompanied by $488 million in community benefits and infrastructure improvements for use in areas such as supporting Garment District businesses, the council said.
“The neighborhood is within walking distance of virtually every major subway line, the busiest bus and rail stations in the country, and the largest jobs hub in the western hemisphere,” Moses Gates, vice president of housing and neighborhood planning at the nonprofit Regional Plan Association, told CoStar News in an email. “Rezoning this area for more mixed-income housing and dedicated transit, while also investing in preserving the existing industries is exactly the right approach.”
Pandemic impact
The Garment District and surrounding areas were hit hard by the pandemic and the changing work patterns that have cut employers’ overall office space needs.
“Half the buildings in this neighborhood will be demolished in the next 10 years,” veteran New York dealmaker Bob Knakal, chairman and CEO of BK Real Estate Advisors, said in a recent interview, predicting what would likely happen after the council approved the plan. “Most of the office buildings in the Garment Center are functionally obsolete. They can't handle new technology … everything that you need in a new building. … You're going to get all these massive buildings built.”
The plan is expected to create more office-to-residential conversions, especially with the city’s 467-m incentive program, which gives developers tax exemptions in exchange for a portion of rental units being affordable, industry professionals have said. It is also set to allow new high-density residential zoning districts that permit buildings’ total square footage size to go above 12 times the floor area.
The approval comes as New York contends with what the city has reported as a historic low rental vacancy rate of 1.4%.
New York’s market-rate apartment vacancy rate of 3.5% is less than half the U.S. average of 8.1%, according to CoStar data. The city’s record-high market asking rent of about $3,350 is about double the national average of $1,772, CoStar data shows.
The median residential rent in Manhattan in July rose to a new high for the fifth time in six months to $4,700, up from $4,300 a year earlier, according to a Douglas Elliman report released Thursday and compiled by appraiser Miller Samuel. The median rent for both non-doorman and doorman apartments reached new highs while the market share of bidding wars, which indicates demand, also rose to an all-time high.