What’s Next? Alumni on the Future of Real Estate

Published in St. John's Law Magazine.

The COVID-19 pandemic has put a spotlight on opportunities to convert commercial space in New York City into residential properties. Growing the housing stock in this sustainable way will require shared vision, as well as a private-public partnership with state and local governments focused on removing regulatory obstacles.

On the regulatory front, New York Governor Kathy Hochul has announced plans to amend the Multiple Dwelling Law to facilitate conversions of Manhattan commercial buildings south of 60th Street that were built before 1980. That effort, and similar legislative changes, could clear the way for tremendous redevelopment that would benefit property owners, tenants, and the city more broadly.

Governor Hochul's support is rooted in past success. In Lower Manhattan, approximately 20 million square feet of office space has already been converted to apartments and, over the last 20 years, the area's residential population has reportedly doubled. The rise of that mixed-use community proves that conversions can serve all stakeholders. Now, looking to Midtown Manhattan, experts believe that about 10% of older commercial buildings could be converted, generating some 14,000 new market-rate and affordable units.

While providing safe, affordable housing is a major benefit of conversion, it's not the only one. We've seen that neighborhoods with more diversified uses are more resilient in the face of economic stress. For instance, Downtown Brooklyn seemed to suffer far less economic pain during the pandemic than predominantly commercial neighborhoods. Conversions could also boost public safety, as streets with a mix of properties tend to be less desolate. In addition, building owners may find conversion a cost-efficient alternative to upgrading properties to meet environmental regulations and the needs of today's commercial tenants.

This isn't to say that converting New York City commercial space on a large scale would be easy. Midtown East offers some insight. Changes to residential use there would require reconsideration of 2017 rezoning laws. For example, the requirement that conversions on side streets be approved through the city's Uniform Land Use Review Procedure often involves uncertainty and inordinate delays.

Structural issues could also impede conversions. The large floor plates of some city office buildings render it difficult, if not impossible, to address requirements for light and air. Many laws and regulations that impede conversions were enacted long ago to address dangers in tenement buildings. But those provisions don't necessarily reflect technology advances, such as new ways of providing air conditioning, ventilation, heating, lighting, sprinklers, and fireproof construction.

My colleagues and I look forward to advising our clients in connection with these exciting issues. With appropriate legislative amendments and government support, including sensible incentive programs, the promises of large-scale conversions from commercial to residential use can be realized.

This article originally appeared in St. John's Law Magazine.