The Country’s Largest Office-to-Residential Conversion

The largest-ever conversion project of an office into residential space in the United States is currently in progress inside the previous headquarters of the Daily News.

The nation’s biggest office conversion project at 25 Water St. in Manhattan, NYC
NY state lawmakers make the case for this CRE lifeline
Blazing a new path in office real estate
The 25 Water St. Project is not without skeptics
From office building conversions to industrial, retail, and more, find CRE financing on your terms

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The nation’s biggest office conversion project at 25 Water St. in Manhattan

The former Daily News and JPMorgan Chase office building at 25 Water St. in Lower Manhattan is set to become a home to over 1,300 apartments, marking the most significant transformation of its kind across the nation, according to the property owners.

Amid the pandemic, the iconic building was vacated, paving the way for its new proprietors to utilize old regulations facilitating the transformation of commercial buildings into residences within the Financial District.

The ambitious plan includes dismantling the office spaces, introducing courtyards, and raising the height of the 22-story building by an additional ten floors.

Though the official residential proposal has not yet received the green light from the city’s Department of Buildings, gaining such approval is typically a formality for such conversions in Lower Manhattan, provided they adhere to existing zoning and construction standards.

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NYC and NY state lawmakers make the case for this CRE lifeline

State lawmakers are mulling over potential changes to zoning rules, along with a new tax incentive for office-to-residential conversions, which are currently being negotiated in the state budget.

These changes could provide a significant boost to the housing supply in areas like Midtown and Flushing, Queens, according to both Mayor Eric Adams and Governor Kathy Hochul.

The refurbishing process of a commercial building into a residential space is generally quicker than building a new structure from scratch, shared architect Eugene Flotteron, who is part of the team at CetraRuddy responsible for the 25 Water St. floor plans.

According to the developers, the apartments should be ready for occupancy within roughly two years.

However, transforming corporate offices into living spaces is neither a simple nor a budget-friendly task. The property owners, GFP Real Estate and Metro Loft, plan to excavate two courtyards in the middle of the building, subsequently placing apartments around them.

This innovative approach will enable the building to comply with light and air prerequisites. Furthermore, plans are afoot to increase the building’s height to 32 stories while abiding by the area’s density rules.

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Blazing a new path in office real estate.

According to GFP’s Brian Steinwurtzel, this project presents a unique set of complexities and calls for extensive structural work that carries a hefty price tag.

The joint venture purchased the building, formerly known as 4 New York Plaza, for approximately $250 million late last year and are preparing to invest hundreds of millions more in its conversion.

The cost per square foot for most conversions falls within the $400 to $500 range, making the overhaul of the 1.1 million square foot building a monumental financial undertaking.

The renovated building is expected to appeal to a diverse range of prospective tenants, with planned amenities including a state-of-the-art gym, ground floor retail outlets, and two swimming pools.

Developers envision the new residents to range from young single professionals just starting out in New York to families seeking spacious units.

According to preliminary design drafts, the existing floors will house more than 50 luxury and market-rate apartments varying from studio to four-bedroom units.

The unique layout reflects the intricate process of converting commercial spaces distanced from windows into comfortable, livable spaces.

The redevelopment won’t include any units with rent control for low-income renters. This is a common scenario in the Financial District’s office conversions, where there are no affordability mandates.

The 25 Water St. Project is not without skeptics.

Despite this, skepticism and opposition from affordable housing advocates and local legislators continue to build, particularly as new conversion regulations for Midtown, Flushing, and the Bronx’s Hub are under consideration.

City Council members recently questioned the Adams administration about the lack of affordability requirements in their conversion plans. The proposed plan would allow owners to repurpose offices into residential spaces in buildings erected before 1991.

The project’s developer, Steinwurtzel, stated that if the city and state lawmakers truly aim to convert office buildings into residential spaces, substantial financial incentives would be needed.

And if they are considering the inclusion of affordable housing in these conversions, the incentives would need to be even more substantial.

How is remote work helping cause a $500 billion office property crash?

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June 11, 2023