Seoul Gazette - Tight housing market boosts New York office conversions

Water Street in lower Manhattan has been a popular area for the makeovers, earning it the nickname "Conversion Alley," with buildings offering a mix of luxury and affordably-priced apartments to qualify for municipal abatements.

"My belief is just about any building could be converted as residential," Joey Chilelli, partner at real estate developer Vanbarton Group, told AFP during a tour of an office highrise at 77 Water Street the firm is converting into a residential building.

The real estate retooling has reached celebrated structures such as the Flatiron Building near Madison Square Park, which is currently being converted. Real estate firms view the projects as less risky and quicker to implement than many new builds.

The movement comes as rental costs continue to drift higher. In April, the median rent of a Manhattan apartment topped $5,000 for the first time as the vacancy rate slipped to a six-year low of 1.55 percent.

By contrast, commercial real estate vacancies stood at 14.6 percent in the first quarter, reflecting a lingering impact from the pandemic period when remote working depleted downtown business districts.

Under the current policy, the city abates 90 percent of property taxes on conversions that set aside at least 25 percent of units as affordable housing. The affordable apartments may rent for around one-quarter of market rates, but otherwise look identical.

Such abatement policies have drawn interest from developers, along with a measure that expands the pool of qualifying buildings to those built before 1990 instead of 1961.

- Amenities -

In Manhattan, more than 44 commercial buildings have been converted into residential ones between 2020 and 2024, resulting in nearly 18,000 new apartments.

Real estate firm Cushman & Wakefield expects 31 conversions in 2026 compared with 18 in 2025 and nine in 2024.

In December 2022, former mayor Eric Adams set a target of adding 500,000 new apartments through 2030, while his successor Zohran Mamdani in April unveiled plans for another 200,000 new affordable homes.

Vanbarton began converting buildings in 2013 and currently manages more than 5,000 apartments.

Construction at 77 Water Street is in full swing, with the first residential occupants arriving in October and completion slated for mid-2027.

The 30-floor highrise will contain 650 apartments, some with a view of the Statue of Liberty.

Chilelli said the firm is anticipating hundreds of thousands of applications for suites designated for affordable housing; the winners will be determined by lottery.

At Pearl House, a 1972 building at 160 Water Street, the conversion has resulted in nearly 600 new apartments since December 2023.

"We are very very happy here," said renter Charles Wisell.

Wisell, an attorney, originally rented a one-bedroom apartment but has gone for a bigger space to accommodate his wife and son, who now prefer their new abode to their home outside the city.

Wisell raved about the building's amenities, which include a bowling alley, a sports suite featuring simulated golf, a spa with a jacuzzi, a "paw salon" for pets and a "game den" with backgammon, board games and a pool table.

"The location is terrific, you're right in the middle of everything," Wisell said. "I'm walking distance to my office."

- Some affordable units -

At 77 Water, Vanbarton has implemented suggestions from renters, including a room with light therapy in the spa.

At other converted Manhattan buildings, developers have installed basketball courts, Pilates studios and both indoor and outdoor pools.

Such luxury services may be included in the rent or are available to residents for a monthly fee of $100-150.

Monthly rents at Pearl House start at $3,995 for a studio and $6,475 for a one-bedroom. Rents for the affordable units begin at $932 for a studio to $3,286 for a three-bedroom.

In Manhattan, the average price in April for a one-bedroom was $5,228.

The biggest conversion so far is the SoMA, which was built in 1969 and once occupied by JPMorgan Chase and the New York Daily News. It has 1,320 apartments.

But that will be overtaken in 2027 by the former Pfizer building in midtown, which will have around 1,600 apartments.

K.Han--SG