Interesting piece Vishaan Chakrabarti, FAIA with great visualizations. This is a critical conversation. But to understand the full picture, one needs to dive deeper into the complex issues of tax abatement, zoning, high construction costs & interest rates and market pricing dislocation. New, flexible government policies can support projects but FUNDAMENTAL ECONOMICS DRIVE PROGRESS. A bit deeper on zoning & pricing relating to converting office... ‘Zombie’ office buildings with large floor plates cannot be converted to residential without creating a large courtyard in the center of the plate to provide windows and light to every bedroom per current zoning. Creating that donut hole 🍩 comes at tremendous expense, in addition to all new infrastructure, systems and build out of the units. In Midtown, there are many ‘zombie’ candidates, however, the asset pricing just isn’t there yet to make the economics work. Every building is unique but, generally speaking, the purchase price must be <$300-400/sf for numbers to pencil and recent rate spikes haven’t helped, ceasing up the capital markets. 2024 should provide some stability. 🤞 🙏 The good news is, there’s a template. Many office buildings in the Financial District were converted after 9/11 and there are a few recent examples as well: 1. 160 Water St (in process): Owner, Vanbarton Group LLC marketed the property for sale in 2021 for $200m with no takers; they paid $165m in 2014 for the 500,000 sf. For the purposes of simple math, let’s use their basis of $165m or $330/sf. 2. 175 Water St (recently completed): Ownership group led by conversion king, Nathan Berman Metro Loft Management. In 2019, AIG sold the asset 684,000 sf for $270m or $395/sf. Conclusion: Pricing of ‘Zombie’ office buildings in Midtown need to drop to downtown levels in order for the economics to pencil. Let’s keep this conversation going as it’s critical to the long term health and viability of the City we love. I❤️NYC JLL
Excited to be on @NY1 tomorrow at 7:20am to discuss the below with @patkiernan and @JamieStelter.
