Office-to-Apartment Conversions Hit a Milestone in New York—Here’s What Investors Should Know About Them
Summary
New York City is seeing a surge in office-to-residential conversions, driven by zoning changes and financial incentives. Hosts and investors should be aware of the structural, mechanical, and regulatory complexities of these conversions, but also consider debt-based investing to gain exposure without the operational burdens.
Key Insights
- •New York City's zoning amendments are expanding eligibility for residential conversions, particularly south of 60th Street, and the Midtown South rezoning plan aims to relax restrictions on residential conversions.
- •Financing for office-to-residential conversions is made easier by the 467-m tax abatement introduced in the New York State 2025 budget, offering potential savings up to 90% for up to 35 years.
- •Apartment conversions involve extensive mechanical and plumbing overhauls, requiring re-engineering of entire water, HVAC, and electrical systems for multifamily code compliance.
Action Items
- ✓Consider the complexities of office-to-residential conversions including structural changes, compliance with regulations like the ADA, and overhauling mechanical and plumbing systems when considering property investments or market trends.Effort: highImpact: medium
Tools & Resources
- →Connect Invest: Through Connect Invest, investors can participate in real-estate-backed notes, secured, short-term debt positions.
Watch Out For
- ⚠Failing to account for the structural, mechanical, and compliance complexities of converting office buildings to residential units could lead to significant financial and legal challenges.
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