CBC Report: The Potential for Office-Residential Conversions

Office vacancy rates in New York City have doubled since the March 2020 onset of the COVID-19 pandemic, “exceeding the previous record level set in the early 1990’s;” and leaving the city’s office market “as uncertain as at any point in the modern era” according the recently released report by the Citizens Budget Commission (CBC). Following an in-depth analysis of the former program’s use, the CBC’s report “offers lessons for designing a cost-effective program to support office-to-residential conversions in today’s market.” Based on a recent estimate, a building’s price would need to fall below $262 per square foot to make a residential conversion financially feasible — assuming renovation costs of $100 to $200 per square foot; and while market-rate projects have continued at a slower pace without incentives since the expiration of 421-g, mixed-income conversions would most likely require tax breaks to be financially feasible. The CBC further points out that prior to any new construction incentive being designed, there are several questions that need to be answered; and if policy design is done well, “conversions can enhance the long-term competitiveness of New York, protect its property tax base, and improve the lives of its residents.”

Source:    https://cbcny.org/research/potential-office-residential-conversions