2A — April 2025 — M id A tlantic Real Estate Journal
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M id A tlantic Real Estate Journal
M id A tlantic R eal E state J ournal Publisher, Conference Producer ..............Linda Christman VP, Conference Producer .............................Lea Christman Editor/Graphic Artist ......................................Karen Vachon Contributing Columnists .......................Richard J. DeMarco, AIA, MADGI Design; Becky McLaughlin, WithMe, Inc. Mid Atlantic R eal E state J ournal ~ Published Monthly Periodicals postage paid at Hingham, Massachusetts and additional mailing offices Postmaster send address change to: Mid Atlantic Real Estate Journal 117 HMS Halsted Dr., Hingham, MA 02043 USPS #22-358 | Vol. 37, Issue 4 Subscription rates: 1 year $99.00, 2 years $148.50, 3 years $247.50 & $4.00 single issue - plus postage
Richard J. DeMarco, AIA
NYC commercial-to- residential feasibility C ommercial tenants cur- rently only use approx- imately 50% of their offices. Companies are either shrinking their space or not renewing their leases. To make matters worse, prior to the pan- demic, many owners of older, mortgage-free office buildings took out loans against the equi- ty. This leaves many landlords struggling to afford their mort- gages and desperate to either sell or find an alternative use. Converting a commercial building to a multi-family res - idential use potentially in- creases the revenues by 150%, providing a solution. Our firm is currently reviewing $2 billion worth of potential conversions for both current owners and potential buyers. The cost of converting large office towers ranges from $350 to $400 psf. In smaller buildings this might increase to $450 psf. Considering the current resi - dential rents, this means the buildings acquired for between $190/sf and $445/sf are viable for conversions.
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Commercial buildings con - structed between the 1920s and 1950s are particularly feasible, since many of these properties are less than two-thirds as profitable as they could be as residential buildings. Real estate tax abatements and the recent passage of NYC’s “City of Yes” law, also make this a good time to convert buildings. Currently, New York State real estate taxes are abated for 30 years, if a converted property contains at least 30% affordable housing units. The “City of Yes” is a mas - sive rezoning initiative that makes conversions easier by eliminating some of the burdens and restrictions in an effort to encourage the construction of affordable housing alongside market rate units. The initia - tive also rezoned Manhattan’s Midtown South section, opening
it to conversions. Developers are now permitted to build 20% more of a floor area and increase building heights to accommodate increased square footage of affordable units. Plus, zoning laws have been amended so that commercial properties that received a certificate of oc - cupancy prior to 1991 can now be converted to residential use amounting to 12 times of their lot area. This change adds ap - proximately 122 million s/f of commercial space eligible for conversions. Pre-1991 commercial prop - erties are usually overbuilt, meaning they are constructed to the sizes exceeding today’s zoning limits. Likewise, com - mercial buildings have a higher allowed floor area to height ratio than new multifamily buildings. That’s why the “City continued on page 16A
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