Given the scale of the office vacancy crisis in some urban centers coupled with the cost and complexity of converting this stock, an as-of-right approvals process can greatly decrease the pre-construction timeline, providing timely and crucial cost savings.
City of Yes was just passed that shortens conversion approval timeline significantly
Zip code level average predicted probability of conversion in 2023 for all class types.
They included Staten Island hehe
Between 2010 and 2020, we observe 900 conversions to multifamily, as well as 844 re-developments
this is way more conversions that before, almost 10x!
regardless of the strength of the market conditions encouraging conversion, “it is highly unlikely that any major conversion activity would have occurred without tax incentives”
Real Estate Tax is typically calculated as a percentage of an annual rental income and varies between 25%-35%. So having a tax abatement significantly boosts the valuation and justifies the expenses associated with the conversion.
98 lower Manhattan office buildings
wow!
The Flatiron Building in New York will be redeveloped into condominiums
Can't wait to see the final product. It's a very special product!
And many obsolete office buildings don’t work as conversion projects because their floors are too big or due to other design issues.
Most common issue is the inability to provide sufficient light and air . Some developers opt to create light wells right in the middle of buildings.
Washington, D.C., has been particularly hard hit by the office downturn because the federal government has been especially permissive in allowing employees to work from home.
Even harder now because of DOGE efforts to cut government leases
One of the issues facing converters is that even if an office building is dying, it often has a few existing tenants who would need to be relocated.
It's true that owners rarely have 100% vacancy. There are always a handful of office tenants that remain in their buildings.
TF Cornerstone
NYC Based Developer