Office conversions to apartments are sweeping the country, as my colleague Emily Davis reported on Thursday.
According to CBRE Group data, 23.3 million square feet in the 58 largest US markets will be converted or demolished by the end of 2025, versus 12.7 million square feet of new office construction.
But in the Big Apple, the gap between newly office creation and offices lost to conversion is even more stark, Realty Check found.
A different, recent CBRE report said that if every conversion in New York City “currently underway, proposed and rumored as of Q4 2024” were to be completed, it would remove about 16.5 million square feet from Manhattan’s total inventory — a 3.9% reduction.
The phenomenon makes the office market look stronger by reducing vacancy rates. It’s good news for owners of obsolete buildings who can afford the high costs of conversions. It’s bad news for tenants as the diminished supply means higher rents overall.
But our survey of the situation clearly shows which trend has the momentum.
The conversion tsunami has migrated from the Wall Street area to swamp Midtown.
Construction will start this year at 5 Times Square, which RXR, SL Green, and Apollo Global Management will turn mostly into 1,250 rental apartments, a project facilitated by city zoning changes. The tower — one of the four, brightly-lit projects that went up 25 years ago and defined the “new” Times Square — was once home to Ernst & Young but is now mostly empty.
Metro Loft Developers and David Werner Real Estate Investors are going full-steam on converting the former Pfizer headquarters at Third Avenue and East 42nd Street into 1,602 apartments.
Downtown, GFP Real Estate and Metro Loft are putting the finishing touches on 25 Water St., where tenants have begun moving into 1,230 rental apartments.
These and many other conversions are completed, well underway or set to begin imminently.
In comparison, precious little is underway in new office construction (excepting the near-finished JPMorgan Chase headquarters tower, which will have 2.5 million square feet).
The only sure “go” on our radar is Related Companies’ 70 Hudson Yards, a 1.1 million square-footer which seems a sure thing with Deloitte signed as the anchor tenant.
The other planned or dreamed-of office projects fall between “not yet,” “some day” and “if ever.”
BXP, formerly Boston Properties, is stuck in neutral at 343 Madison Ave., where it wants to built a 950,000 square-foot tower. No tenants have been signed and work has yet to begin.
Until then, BXP is building a new glass entrance portal to Grand Central Terminal.
A long-touted project call 3 Hudson Boulevard by BXP and Moinian isn’t surging ahead, either; an $80 million loan that BXP put into the joint venture is in default and they’re looking for new funding, BizNow reported.
The 1.8 million square-foot tower from Vornado, Rudin, and Ken Griffin is still in the city’s land-use review and wouldn’t be finished for years in any case.
As for the supertall known as 175 Park Ave. that will include the Grand Hyatt Hotel site on East 42nd St., RXR and TF Cornerstone are seeking $4.84 billion in federal loans to finance the project.
CBRE in a separate survey found recent and ongoing conversions removed 15.5 million square feet of offices from the inventory – not remotely offset by less than 2.5 million square feet of new offices.
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