From spreadsheets to bedsheets — that’s the biggest news in Big Apple real estate.
New state and city measures are spurring property owners to turn obsolete office buildings into modern apartments. The next eight years will likely see nearly 19,000 residential units created out of former office space — on top of 5,500 already converted since 2010.
It’s an impressive total in an age when putting up a single new building with 300 apartments can take five or more years to plan, finance and build — not including the time it takes to buy the land and demolish old buildings.
“It’s now significantly easier to convert buildings across New York City,” said Planning Commissioner Dan Garodnick, who pushed for the changes and calls conversions a “a win-win, helping us through pandemic-related disruptions by creating much-needed housing and putting underused commercial space to better use.”
The phenomenon gained traction from two government actions. A state program grants tax abatements in exchange for making 25% of rental apartments created by conversions “affordable” — rent no more than one-third of median neighborhood income.
Meanwhile, Mayor Eric Adams’ “City of Yes” measures, passed last month, made buildings that opened as recently as 1991 conversion-eligible, compared with earlier cutoffs at 1961or 1977, depending on location.
The measures also opened the whole Big Apple up to conversions, which previously were allowed only in parts of FiDi, West Midtown and a few high-density areas like Long Island City.
Most earlier conversions were in the Wall Street area, which many companies left in the 1990s. Among the recent ones is 55 Broad Street which opened to tenants last year.
Most notably, 70 Pine Street, a landmarked, 1932 skyscraper, went dark after AIG moved out in 2009. After several false starts by real estate firms deterred by the cost and complexity of conversion, it was reconfigured by Rose Associates and DTH Capital between 2012 and 2016. The $600 million job yielded more than 600 luxury rental units, which were quickly snatched up.
The late chef James Kent, who lived in one of them, created popular Crown Shy on the ground floor and fine-dining SAGA and luxurious lounge Overstory in the tower’s magnificent Art Deco upper floors.
Still, converting a building is no picnic. Among the challenges, building and fire codes are different for residences than they are for office buildings. Many large office floors don’t have enough windows as required by law for apartments, so builders must redesign facades or hollow out parts of the structures to create interior courtyards. Central air-conditioning must be replaced with individually-controlled units. Office bathrooms aren’t suitable for residential use.
Even so, conversions are an appealing option for owners. While buildings that are no longer attractive to office tenants can end up in foreclosure, just about every residential conversion in a market starved for more housing swiftly draws families wanting new homes.
And it’s financially rewarding for landlords. Nathan Berman, whose company Metro Loft is a partner in five conversion projects, said a typical conversion will cost only “about one-third of what it would cost to build from the ground up.”
Or less: To construct a new tower of the same size and quality as 5 Times Square might be a near $500 million job based on recently completed projects in Manhattan, which has the world’s highest development costs. By comparison, the conversion is budgeted at a puny $95 million.
Here are a half-dozen major transformations either underway or to set to be soon.
5 Times Square
Cue the bright lights! No location better illustrates how times are changing than this 38-story tower at Broadway and West 42nd Street. When it opened in 2002, it was one of the quartet of new office buildings that proclaimed a “new” Times Square and made the “Crossroads of the World” suitable for companies such as original tenant Ernst & Young. But EY moved to Hudson Yards in 2022, leaving a void. Other companies soured on the area overrun by tourists and menacing Elmos and pedicabs. RXR Realty, SL Green and Apollo Global Management recently filed plans with the Department of Buildings to convert its mostly empty floors into 942 apartments. The $95 million plan will still include some commercial space, and the time frame for completion isn’t clear.
219 E. 42nd and 235 E 42nd St.
Expected to be completed in 2027, this adjoining pair at the bustling corner of Third Avenue, one block from Grand Central Terminal, is set to be the biggest conversion in the city so far. Interior demolition is underway for a 1,600-unit apartment complex that will combine two buildings that were once home to Pfizer — before the pharmaceutical giant moved from both buildings to the Spiral in Hudson Yards. Owners MetroLoft and David Werner Real Estate Investments are adding 19 stories on top of the original 10 stories at 219, with steel to start rising in the spring. The finished project will boast 100,000 square feet of tenant amenities including a rooftop pool and what Metro Loft’s chief marketing officer Mitchell Wasser termed “big-deal fitness” facilities.
111 Wall St.
The 1960s-vintage, 25-story tower at the corner of Wall and Water streets has been the poster child of the pandemic-years office crisis. Previous owner Citigroup moved out in 2019 and then sold it to Nightingale Properties and InterVest Capital Partners. They spent almost a half-billion dollars to modernize and beautify it with a new bronze facade. But Covid-19 doomed hopes to lure new office tenants. Now, Nightingale’s head is under siege by the Feds over alleged fraud. InterVest has teamed up with Nathan Berman’s Metro Loft Management to turn the empty hulk into 1,600 rental apartments, many with river and harbor views. Metro Loft’s Wasser said there will be 75,000 square feet of tenant goodies, including a rooftop pool, running track and underground basketball courts. “It’s now in the design and planning stages,” he said, and work will start in a few months. Windows need to be redesigned for residential use, Wasser noted, but the “overall look” won’t change.
Flatiron Building
Conversion will yield 38 luxury condo residences by 2026. The iconic triangular, 22-story landmark overlooking Madison Square Park opened in 1902 and endured many ownership changes over the decades, while its beauty was too often hidden behind scaffolds for never-ending repairs. It fell empty after book publisher Macmillan moved out in 2019, then hit bottom in 2023 when the high bidder in a court-ordered auction failed to put up the money. But Jeffrey Gural and partners the Brodsky Organization and Italy’s Sorgente Group rode to the rescue with a $161.5 million purchase. They won’t alter the much-loved exterior except for a slight reduction in retail space. Residents will enjoy eye-popping views north, west and east.
750 Third Ave.
The 34-story tower between East 46th and East 47th streets was one of the International-style towers that sprouted in the 1950s when the Third Avenue el was demolished. Once home to financial tenants, it lost its juice after Fairchild Publications and accounting firm EisnerAmper moved out a few years ago, leaving 80% of its 800,000 square feet vacant. Owner SL Green plans to turn it into 639 rental apartments. They’re chopping out thirteen floors on the Third Avenue side to make room for a “winter garden” designed by architectural firm Gensler and adding eleven floors on the building’s western side. The finished product, which will cost $805 million and take three years to complete, will include a health club and a half-acre of outdoor space. “They are full speed ahead with design and expect to start demolition work mid-year,” an SL Green rep told The Post.
25 Water St.
Once known as 4 New York Plaza, the office structure was hated for its Brutalist exterior and skinny windows designed to help keep 1960s computers cool. Its gloomy interior appalled employees at JP Morgan Chase, the Daily News and American Media, one of whom called it a “window-less, joyless hellhole.” The new owners are adding ten floors on top of the original 22 and creating a “window wall” facade designed by architects CetraRuddy. Tenants in 1,320 apartments will enjoy 100,000 square feet of recreational facilities, including indoor and outdoor pools, a large fitness center, a basement spa and sports simulators. The first units will be finished in February with the rest to follow over the next twelve months.