New York Governor Andrew Cuomo will review a proposal to convert office buildings in Midtown Manhattan into apartments, as commercial landlords warn the exodus of office workers from the district looks increasingly permanent.
The Real Estate Board of New York, whose members include nearly every major landlord and developer in the city, is proposing dramatic changes to zoning rules in Manhattan’s last dedicated office district, according to the New York Times.
Cuomo’s office would say only that he would review the idea, while a spokesman for Mayor Bill de Blasio welcomed the proposal.
‘City Hall is always looking for sensible, equitable ways to deliver more housing,’ said the spokesman, Bill Neidhardt.
New York Governor Andrew Cuomo will review a proposal to convert office buildings in Midtown Manhattan into apartments
In October, only 10 percent of Manhattan office employees had returned to the workplace after fleeing in the pandemic, according to a survey
The radical proposal comes as many commercial landlords in Midtown face a harsh reckoning.
In October, only 10 percent of Manhattan office employees had returned to the workplace after fleeing in the pandemic, according to a survey from the Partnership for New York City.
What began as a stopgap measure looks increasingly like a long-term trend, as employers find that remote working has little impact on productivity and consider permanently downsizing their office footprint.
The survey found that employers expect that two out of five of employees who return to the office in 2021 will continue to work remotely at least 50 percent of the time.
Of the employers surveyed, the vast majority, 72 percent, had offices in Midtown.
Commercial property sales have lunged by nearly 50 percent through October, Rahul Jain, a deputy state comptroller, told the Times.
Retail, the other mainstay of Midtown, has also been reeling in the pandemic, and landlords fear the shock could be long-term.
The Times Square corridor suffered a dramatic 18 percent annual decline in average rents in the third quarter, according to commercial real estate firm CBRE.
The Times Square corridor suffered a substantial 18 percent annual decline in average rents in the third quarter, according to commercial real estate firm CBRE
Across Manhattan, commercial rents have dropped nearly 13 percent from a year ago, the firm said.
On Madison Avenue, one of the nation’s premier luxury shopping strips, more than a third of storefronts are empty.
Many retail tenants, forced to close for months by government shutdown orders, are now locked in legal battle with landlords over unpaid rent.
The developer at the Shops at Columbus Circle, a luxury mall overlooking Central Park, has accused a group of high-end retailers, including Michael Kors and Hugo Boss, of skipping out on more than $7 million in rent and fees, according to the Times.
On Fifth Avenue, the Italian designer Valentino has sued its landlord to get out of a lease of nearly $1.6 million per month.
The carnage in commercial real estate threatens to put a further dent in New York City’s already battered finances, as property taxes represent the largest source of city revenue.
Commercial property accounts for 41 percent of overall property taxes.
Cars drive along 34th Street in front of the Macy’s Herald Square store as seen from the Empire State Building on December 1 in New York City
In October, real estate sales volume in New York City declined 34 percent from last year
A recent report from REBNY estimates that New York City and state have lost a combined $1.4 billion in tax revenue this year as real estate transactions in the city plunged during the coronavirus pandemic.
The proposal to convert office space into apartments would also ease the chronic shortage of housing in the city, proponents argue.
REBNY estimates that converting even just 10 percent of office space to residential would create 14,000 apartments citywide, including as many as 10,000 in Manhattan.
Changes to zoning rules needed for any conversions would require that some portion of new housing be set aside as affordable, the board said.