New York developers may have received some good news to start the new year. Your old office space may soon become your kid’s bedroom. Mayor Adams’s plan to allow for the rezoning of office buildings into additional housing may finally be greenlit. After the wildly popular 421a tax abatement expiration last year, permits for new multi-family homes plummeted—an ultimately short-sighted move by the past administration that did more to hurt our city than help it.
Like most big cities, New York is still in a housing crunch. This crisis has been decades in the making despite the steady population decline. The cost of land and construction alone means that for a developer to build new housing, they must sell apartments for numbers higher than the market will bear – leaving the average New Yorker squeezed out of homeownership. This rezoning could fix this problem if the money goes into the right pockets.
One myth about developers is that every project built and sold is a home run. This is far from the truth. If you are smart and the stars align, then yes, a developer can make money – but if one of these things tilts off kilter, that developer loses money, and the project goes upside down. I have sat across the table from many developers, watching them make bad decisions after bad decisions and failing to realize that you can’t just “build it and they will come.” You have to build the right project in the right location for the right buyer – and then you give yourself a chance.
That brings us to the office building conversions. I have done probably 30 or more conversions in my career, and none of them were easy—especially office building conversions. Converting a commercial building into a successful residential one takes a different skill set than building a ground-up multi-family one. It’s more of an art than a science, and it takes vision and creativity – not attributes many successful developers have.
When most of these office buildings were constructed, light and air were not priorities. The floor plates were massive. The elevators and stairways are in different places. And many of the columns were in the right place for an office rather than an apartment. Usually, the CEO gets the corner office in an office building. In an apartment building, almost every apartment wants a corner living room. It takes a lot of creative work to achieve this with an existing structure. Turning half-empty office buildings into homes will be a significant challenge. Unless the city adds additional tax breaks and special financing, the deal’s economics will force developers to create a glut of overpriced luxury homes instead of nicely appointed affordable luxury housing. One only has to look at parts of The Financial District to get a glimpse of what not to do. But, if done right, this has the opportunity to not only revitalize the depressed office corridors but create entirely new neighborhoods.
One of the first conversions I worked on was at 420 West Broadway. It was initially an industrial warehouse that became an art gallery building that we converted into residential condos—a building with three lives. At the time, Soho was not the place to be. It was a dirty, desolate, abandoned warehouse district with old artist lofts that certainly wouldn’t have passed code. This particular developer had the foresight to take a chance and the sensitivity to understand what people wanted. We turned it into a cool loft building that complimented the surrounding neighborhood. Something that was luxurious enough to attract Hollywood A-listers, Wall Streeters, and longtime downtown habitants alike. We created the right product for the right clients at the right time – and he made money.
And now, there will be more of these opportunities for creative and sensible developers. The cookie cutter will not work here. But with the right architect and pre-development planning, these empty office buildings could be turned into anchors for vibrant new neighborhoods and the revitalization of our city – and that is converting into very good news for us all.
Let’s do this.
-Shaun