MANHATTAN – NY – 08/15/2022 – The AMC Theater is seen on 42nd Street in Midtown Manhattan. (Luiz C. Ribeiro for NY Daily News) (Luiz C. Ribeiro/for New York Daily News)
As any New Yorker can easily remember, Midtown — the Manhattan neighborhood stretching from 34th St. to 59th St. and from Third Ave. to Eighth Ave. — was once a bustling beehive of corporate activity and commerce.
On a typical weekday, between the hours of 7 a.m. and 8 p.m., towering office buildings teemed with professionals, food trucks lined the streets, tourists fended off the power lunch crowd, and bars and restaurants overflowed with after-work happy hour customers.
Then, the pandemic hit.
Companies moved their workers to remote home offices for months, years and in some cases permanently. Without the residential presence to make up for the loss, now Midtown Manhattan feels like a shell of what it used to be, especially when it comes to these commercial office spaces that were once filled to the brim.
In San Francisco, Chicago, Denver, Los Angeles, Washington and elsewhere city officials are trying to figure out what to do with the commercial real estate ghost towns left behind by COVID.
The economic impact nationwide has been significant. A study by Columbia University and New York University suggests that lower tenant demand could cut as much as $456 billion off the value of offices across the U.S. — with nearly 10% of that drop happening just in New York City.
So a newish idea is emerging: convert the old office buildings into affordable housing.
Just this week, a string of headlines popped up urging the issue. In Axios Wednesday: “Cities push to convert deserted office buildings into housing.” In the Business Standard on Tuesday: “New York city’s empty offices reveal a global property dilemma.” In Forbes on Monday: “Fearing a Commercial Real Estate ‘Apocalypse’.”
If it feels as if there’s serious trouble on the horizon, hence the sudden explosion of interest, it’s because there is.
Out West, the San Francisco Standard warns of an “epic commercial real estate crash.” In New York, experts worry about an “office real estate apocalypse.” In Chicago, “the office market is much worse than anyone anticipated,” according to one developer. And the hotel sector there is considered “most at-risk of delinquency or default in commercial mortgage-backed securities.”
It’s for all these reasons that cities across the country are finally confronting the stark reality that business isn’t coming back the way it was pre-pandemic, and something has to be done.
Converting tired office buildings — which aren’t likely to attract new commercial tenants who want the flashier, amenity-filled spaces offered at places like Hudson Yards on Manhattan’s West Side — into much-needed housing checks a number of boxes.
For one, leaving these ghost towns unpopulated opens them up to all kinds of problems, including increases in crime and homelessness, both of which could be addressed by rezoning Midtown for more residential space.
For another, the flight of corporate employees to the suburbs and elsewhere has had a domino effect on neighboring restaurants, bars, hotels and shops, all of which stand to gain from a new population of regular customers. Smaller commercial strips in neighborhoods throughout New York City and the region have benefited from keeping their work-from-home employees during the day.
There’s also need. Real estate trade association REBNY estimates that by converting 10% of New York City’s lower-tier office buildings could create 14,000 new residential units. That certainly won’t solve New York’s housing shortage, but it’s nothing to sneeze at, either. In Los Angeles, a study by the RAND Corp. identified commercial properties that, if converted, could produce 92,000 new housing units.
And there are environmental advantages to converting these older buildings into housing as well. According to a 2016 study, “when comparing buildings of equivalent size and function, building reuse almost always offers environmental savings over demolition and new construction.”
So what’s the hold-up? As one can imagine, this is an expensive proposition. Cities are asking for hundreds of millions in budget allocation to perform these conversions, and in some cases are incentivizing projects. But it’s easier said than done.
There’s also bureaucratic red tape and restrictive zoning obstacles, which naturally inject political agendas into what seems like a simple issue of obvious problem meets obvious solution.
But the writing has been on the wall for some time. This newspaper’s Editorial Board, in fact, urged office building conversion in New York City back in March.
With what seems like a renewed urgency to get ahead of the looming real estate problem — if it’s not too late — maybe now cities like New York will decide that some of the COVID collateral damage is permanent, and will require new solutions.
Instead of waiting for businesses to come back to Midtown, let’s do something useful with the corporate spaces that used to bustle with activity, and help keep this once-vibrant part of New York City alive and well.