A 32-story office tower on Manhattan’s Billionaires’ Row is set to be converted to a residential property as the city contends with below-average housing vacancy rates and record-high market asking apartment rents.
TF Cornerstone seeks to turn the office tower at 135 E. 57th St., also known as Tower 57, into a residential property, a spokesperson for the developer told CoStar News in an email. The plans feature 350 market-rate and affordable apartments and use the state’s 467-m tax program. The tax incentive program encourages conversions of commercial properties into housing in exchange for a portion of the units being affordable. TF Cornerstone said 25% of the units aim to be affordable at 80% of the area median income.
The conversion plan is said to have come after TF Cornerstone closed a ground-lease deal with the land owner.
The spokesperson declined to specify to CoStar News project cost and the ground-lease terms.
The building, spanning about 457,000 square feet, has very limited remaining office tenancy, and the developer is working with those tenants to vacate their space soon, the spokesperson told CoStar.
Saks Off 5th, with more than 45,000 square feet, is the largest tenant at the property, according to CoStar data.
The floor plates in the building, which range from 5,700 to 14,000 square feet, make it ideally suited to an office-to-residential conversion, TF Cornerstone said. Floor plates in the 10,000-square-foot range are rare, as typical New York offices have floor plates between 30,000 and 50,000 square feet, TF Cornerstone said.
Boost from tax incentive
The 467-m incentive, introduced last year, has spurred a slew of office-to-residential conversions especially as CoStar data shows New York’s office vacancy rate is still near a record high of 14%. Meanwhile, the market-rate apartment vacancy rate of 3.5% is less than half the U.S. average of 8.2%. New York’s office rebound has primarily been led by demand for new or renovated properties with what’s been described as obsolete stock still facing challenges attracting tenants, industry professionals have said.
More office-to-residential conversions are expected after the City Council’s Subcommittee on Zoning and Franchises and Committee on Land Use on Wednesday cleared a major hurdle and approved the Midtown South Mixed-Use Plan, which proposes to rezone about 42 blocks just south of Times Square to add over 9,500 housing units, including more than 2,800 permanently affordable residences.
TF Cornerstone is no stranger to conversion projects both in New York and nationally. It said it’s also working on the historic Wanamaker building in Philadelphia, which, once completed, is expected to feature over 600 units in addition to renovating office space and updating 300,000 square feet of retail.
Last year, it created a $1 billion venture with real estate investment firm Dune Real Estate Partners to pursue office-to-residential conversions. The partners said at the time that over 18 million square feet, or more than 18,000 units, of conversions were in some stage of redevelopment in New York.