POLITICO New York Playbook PM
CONSTRUCTION WOES: A Midtown office building that was at risk of collapse while being converted into apartments could bring more scrutiny on similar projects, which have become a key piece of the city’s housing-growth strategy.
Converting underused office space into apartments is often thought of as a no-brainer in a city starved for housing. But these projects are notoriously complex and costly to pursue, and converting massive office towers into homes with appropriate access to light and air can be rife with logistical hurdles.
Developer MetroLoft and David Werner Real Estate are in the process of converting the office building on East 42nd Street into apartments. But officials inspecting the site Tuesday found structural columns buckling and floors sagging. The building is now considered stabilized after temporary supports were added, city officials said.
“It does seem like an isolated incident, but one that will likely have some policy and process ramifications going forward,” said one real estate industry source, who requested anonymity to speak candidly about the situation. “I would expect there to be extra scrutiny on the office conversion pipeline, which has been a bright spot in the last two years.”
New York officials have moved in recent years to make it easier to convert underused office buildings into housing — adopting favorable zoning changes and a new tax incentive for conversions, called 467-m. Five office-to-residential conversions have been completed in Manhattan since 2020, comprising 3,000 units, according to City Hall. More than 20 buildings have submitted initial documentation for 467-m, accounting for some 4,000 housing units.
Mayor Zohran Mamdani said today he still considers conversions to be “part of our answer to the housing crisis.”
“We have to do so safely and in a way that is fully accountable,” he told reporters. “We are going to be conducting a full investigation as to how we got to this point, because this is not a necessary consequence of an office-to-residential conversion. This, however, is clearly a breakdown in that process.”
Carlo Scissura, head of the New York Building Congress, said conversions have been a “real success story.”
“I don’t think we should ever take this one-time situation and say it’s going to hurt office-to-residential conversions in general,” he said.
Patrice Derrington, a professor at NYU’s Schack Institute of Real Estate, agrees.
“Definitely we should not have a knee-jerk reaction” to imposing new regulations on these projects, Derrington said. She noted the East 42nd Street project was particularly complex due to a “very, very extensive floor plate.”
Conversions typically work best in office buildings with smaller floor plates, Derrington said, and she expects builders will still find “fantastic opportunities” in those cases. But some developers might “be a little bit wary because the challenges have come to light.”
Nathan Berman, founder and managing principal of MetroLoft, which is highly regarded in the office conversion space, downplayed the incident to The New York Times as a “typical construction mishap.”
“It happens unfortunately far too often on construction sites: falling cranes, people — God forbid — falling off buildings, windows falling out,” he said.
Some real estate insiders bristled at that characterization.
Scissura called the comments “surprising.” The industry source, meanwhile, called the situation “by no means normal.”
“This isn’t behavior that should be expected in any way,” the person said. — Janaki Chadha
