Last year saw twice as much Manhattan office space start to be converted into apartments as the year before – a boom that’s poised to change the chemistry of Midtown neighborhoods historically dominated by office towers, hotels and entertainment venues.
Among them: at least four buildings on Third Avenue in the East 40s and 50s and 135 E. 57th St. at Lexington Avenue, once a symbol of the late-1980s office-development craze. The conversions will bring 24/7 energy and domestic warmth to blocks that are typically quiet after dark.
On the other hand, RXR’s conversion of 5 Times Square into 1,250 apartments — which was one of the quartet of West 42nd Street towers that proclaimed a new era for the “Crossroads of the World” — might have a calming effect on the frenetic street scene around it.
A new study by Cushman & Wakefield, reported in the Commercial Observer, found that conversions of 3.3 million square feet were underway in 2024, compared with 1.6 million square feet in the year before.
The momentum continued after the last New Year’s Eve ball drop, Cushman found, with 4.1 million square feet of conversions begun through August.
The transformations address two simultaneous crises — the city’s well-known rental housing shortage and the galloping obsolescence of many older office buildings.
Cushman senior research manager Reed Hatcher told the Commercial Observer that “policy support” was helping to accelerate conversions — namely, rezonings by the city to make conversions possible where they weren’t previously allowed, along with state-approved tax incentives to sweeten the deals for developers.
The rezoning of Midtown South, passed last summer, quickly brought results. A partnership just bought 12-story 29 W. 35th St. with plans to create 100 studio apartments.
Miller Samuel appraisal expert and market analyst Jonathan Miller told The Post that converted units tend to be as popular with renters as newly built ones.
“They’re generally accepted in the same manner as ground-up construction,” he said. “Of course, there may be projects of either type that are slower to be accepted, but not because one involves conversion and the other ground-up construction.”
Conversion mania contributed to a drop in Manhattan’s office inventory from 466.1 million square feet in the second quarter of this year to 449.4 million square feet in the third quarter, according to Savills.
Most conversions before 2020 were in Lower Manhattan, especially in older buildings in the Wall Street area. The phenomenon continued recently at 25 Water St., where tenants are moving into 1,230 rental units.
Now the wave is swamping Midtown, including the former Pfizer headquarters at Third Avenue and East 42nd Street. The project by MetroLoft Developers and David Werner Real Estate Investors will yield 1,602 new rental homes — the largest such project in the US. As The Post reported, it will boast 100,000 square feet in tenant amenities including a rooftop pool.
SL Green is carving over 600 rental units out of 750 Third Ave., where 13 floors are being chopped out on one side to create a winter garden. Meanwhile, Vanbarton group just nailed down a $300 million loan from Brookfield to purchase the vacant office building at 6 E. 43rd St. near Grand Central Terminal and convert it to 441 rental units.
Buildings Department filings showed that nearby, Rudin plans major East Side conversions at 845 Third Ave. and 355 Lexington Ave.
[Notigroup Newsroom in collaboration with other media outlets, with information from the following sources]
