New York Gov. Cuomo: Empty Offices Should Become Housing

Posted: January 13 2021 @ 2:00 AM | Author: Nate Berg

Like many cities around the world, New York City has seen life drained from its commercial core, as offices have been left to sit nearly empty for months. These unoccupied offices raise a lot of questions about the future of work, the future of cities, and whether buildings built to hold offices will even make sense in a world so thoroughly upended by a pandemic. But they may also be offering some solutions.

According to New York Governor Andrew Cuomo’s State of the State address on Monday, these empty office spaces could take on new lives and solve multiple problems in cities like New York.

“The housing problem in our cities has gotten worse. But the crisis of growing vacancies in our commercial property provides an opportunity,” Cuomo said. “We should convert vacant commercial space to supportive and affordable housing, and we should do it now.”

Without getting into details or specifying an explicit timeline, Cuomo pledged to propose legislation that will open a five-year window for the owners of offices and hotels to convert their buildings to residential uses.

This kind of conversion program is an idea that the Real Estate Board of New York has been advocating for months, as the pandemic has forced many offices to shutter completely and companies to reconsider how much space they really need going forward. REBNY senior vice president Paimaan Lodhi says this will likely lead to significant downsizing in offices, creating vacant spaces that could, under the right conditions, be converted to housing.

Older, less amenity-rich Class B and C office buildings could be relatively easy to convert, Lodhi says, and there’s roughly 150 million square feet worth of them in Manhattan alone. “If you were to just apply a conversion rate of 10% we think you could get something like 14,000 units built, and a pretty sizable portion of that could be affordable housing,” he says.

The immediate impact of the pandemic has revealed the potential for newly emptied space to be converted, according to REBNY, which is a trade organization representing building owners, builders, designers, and brokers. Though Lodhi acknowledges that there are still many questions about if and how companies will resume using their offices and the square footage they occupied before the pandemic, the rise of remote working and the cost of office space is likely to cause many companies to cut their space requirements significantly. The resulting emptiness would be a problem for the city, Lodhi says, with several office-heavy neighborhoods that could turn into economic dead zones. Turning the buildings into housing could be a way to revive these neighborhoods by bringing more people, and the businesses that serve them, to these parts of town beyond office hours.

It has happened before. Lodhi says REBNY’s office-to-housing conversion idea was inspired by what happened in Lower Manhattan in the early 1990s. The area was then dominated by office buildings, and many were standing nearly empty. Lodhi says office occupancy was around 25%. To turn things around, the state and city created a tax exemption and abatement program to facilitate the conversion of older office buildings into residential uses. “What happened was Lower Manhattan went from a 9-to-5 office district to a true live-work neighborhood that was very dynamic, and helped it bounce back after 9/11, after the Great Recession, and even after Hurricane Sandy,” Lodhi says. “Just in that small area alone, they added something like 25,000 residential units, which is just astounding.”

Launching a similar program today would require coordination between the city and the state, each of which has control over certain elements of zoning in Manhattan. They would have to go through the complicated process of rezoning to allow offices in certain areas to be converted, and then count on the owners of the office buildings to make the investment in turning them into housing. Though the Lower Manhattan example shows this is possible, the 25,000 residential units that eventually emerged from former offices there were developed only gradually over the course of two decades.

“This is not something that’s going to occur overnight,” Lodhi says. “If it requires government action, it’s going to take some time. And then the market has to come back.”

Lodhi says this concept shouldn’t be considered a direct pandemic response, but rather a pandemic-enabled reaction that can help start the transformation of what have been parts of the city primarily occupied by offices. “It’s an opportunity to really reimagine New York City, and it’s an exciting opportunity to re-envision these specific neighborhoods,” Lodhi says. “We know it’s been done in Lower Manhattan to great success. So no one can say we’ve never done this before. We have. The question is just about the appetite to do something like this.”

Governor Cuomo’s proposed legislation could be a big indication that, at least on the part of government, the appetite for this kind of conversion is there.

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