Office to Residential Conversions & Strategies for NYC
Long-time lurker here...it seems as though office to resi conversions in the NYC market are far and few in between.
Just seems to risk from an execution perspective.
O2R aside...what are equity strategies people are seeing value in right now in NYC? A few that seem to be proliferating are:
- value add in queens
- office at a ~$300 basis in plaza district/flatiron
- clipping yield on retail
Keen to hear others thoughts.
Based on the most helpful WSO content, here are some equity strategies currently seen as valuable in the NYC market:
Value Add in Queens: This strategy involves improving existing properties to increase their value and rental income. Queens is seen as a promising area for such investments.
Office at a ~$300 Basis in Plaza District/Flatiron: Investing in office spaces in these prime locations at a basis of around $300 per square foot is considered a viable strategy.
Clipping Yield on Retail: This involves investing in retail properties to generate steady income from rents, taking advantage of current market conditions.
These strategies reflect the current trends and opportunities in the NYC real estate market.
Sources: Real Estate Trends (All Asset Types), Multi Family Investing - New York City, CRE’s Brave New World, Investing in NYC, A Discussion on Interest Rates/Macro Fundamentals (Long OP)
For NYC office to resi conversion basis on the buy needs to be inside $200sf. Not a lot of sellers at that price still but starting to see more transactions in the pipeline.
Thanks for the insight. Agreed.
What kind of firm are you with?
GP fund / developer
This is absolutely right. Need to get basis way down to ~$150psf to make it work given conversion cost and holding cost with construction debt at 10%+ interest rates.
I don’t even think $150 PSF is enough. Most of these buildings can’t get converted. And if they can - you probably need to build light wells. Which means you’re going into the foundation. Which really just means you’re opening up Pandora’s box of problems and the cost has a high probability of sky rocketing.
With the above said - people are 100% going to convert buildings bought for $150-200 PSF, I just don’t believe most of them will actually make money due to the structural issues that will pop up that weren’t originally underwritten.
I've seen MetroLoft come up in NYCRE news on office-to-resi with a JV with DWS + Silverstein separately. Isn't there a tax incentive? Hence why SF and LA aren't seeing any among other reasons.
Most office buildings just don't make sense as residential buildings.
I think where you'll see some movement are the much, much smaller Class B/C buildings in more residential neighborhoods, where the floor plates aren't so imposing. Sixth Avenue skyscrapers which were built in the 70s as going to have effectively zero value eventually - they simply are too big, and in too crappy of a neighborhood, to be worth converting, even IF the owners were willing to see at an appropriate price.
Agree with this. Historic buildings are the best, idk whats gonna happen with those post war behemoths.
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