The office condominium, a rarity in New York City, is finding a toehold in places as varied as West Chelsea, Lower Manhattan and Greenpoint in Brooklyn.
For-sale office space is an alternative for companies who don’t want to shell out rent each month. Developers may be warming to the concept because of the hot office market, where commercial space is fetching a premium amid a cooling residential market.
Louis Puopolo, director of strategic development for the Greenpoint Lofts, a new office-condo development at 231 Norman Avenue in Greenpoint, says the largely residential and industrial landscape was ripe for its first commercial condo project.
“It’s financially smarter to build here,” Puopolo said. “You’re spending $150 to $250 per square foot here on development expense. You’d be paying much more in areas like Manhattan.”
Greenpoint’s central location between Manhattan, Long Island City and other Brooklyn neighborhoods also made it a prime candidate for building, Puopolo said.
“We’re pursuing people [to buy] who live in the area and have businesses in Brooklyn,” he said. “We like to think of our service as the flagship of this area, and we aim to attract architects and designers to follow our lead and move here.”
Also in hipster Brooklyn, the new owners of a former office loft in East Williamsburg are considering office condos for a 21,000-square-foot industrial site at 249 Vestry Street, GlobeSt.com reported. The site sold for $2.45 million.
Such projects may only be the rumble of an office-condo wave in New York. This summer, Shea Commercial, the nation’s largest builder of office condos, announced its intentions to enter the city, partnering with former Dwelling Quest brokerage owner Daren Hornig, who has a background in both residential and commercial real estate (see Dwelling Quest CEO exits brokerage).
“We’ve been working on the move [to New York] for a couple of years. It’s coming together now,” said Jim Riggs, president and CEO of Shea Commercial. “We had to develop the right relationships over time in Manhattan so we could set up there.”
In Lower Manhattan, the 17-story 125 Maiden Lane has nine contracts out on office condos, said Michael Rudder, director of office leasing and sales for landlord Time Equities Inc. The 350,000-square-foot building has 180,000 square feet available for office condos, with 18,000-square-foot full-floors for sale as well as 6,000 square foot wings of floors ready for buying. Contracts have been coming in since May at the former Class A office building.
“We just have a strong feeling that [office condos] is an underserved opportunity,” said Rudder. “I don’t see this as a one-shot deal. This is a trend happening in the market, with a whole new form of occupying space, of ownership rather than rental.”
Spaces at 125 Maiden Lane cost from $350 to $425 per foot, in comparison with the $750 to $850 per foot in areas such as Chelsea, according to Rudder.
“Lots of firms are looking to buy — nonprofit arts groups, attorneys,” said Rudder. “They certainly can’t afford their own building in Manhattan.”
The Chelsea Arts Tower, a new glass and concrete 20-story tower slated for completion last month at 545 West 25th Street, has been the most high-profile commercial condo project so far. Floor sizes in the building range from 3,100 to 4,700 square feet.
The building has targeted art dealers, private collectors and other creative industries like fashion, photography, public relations and architecture.
Earlier this year, the Marlborough Gallery inked a deal for the first and second floors, including an outdoor sculpture terrace, for $9.15 million, or around $990 a square foot for the 9,250-square-foot space.
In another deal, Glenn Fuhrman, a major art collector who manages Michael Dell’s fortune, purchased the ninth and 10th floor, totaling 7,680 square feet, for $5.45 million, or $709 a square foot.
Stuart Siegel, a broker at commercial firm Grubb & Ellis, put together the Chelsea Arts Tower deal.
“As the prices in Chelsea rose to buy,” Siegel said, “there was less and less product out there. Someone looking for a 5,000 to 10,000 square foot [building] had to buy a site that was much more expensive and much bigger than they needed.”
Originally, the plan was to turn the tower into rental condos, but the numbers and cost didn’t work out. “It made sense to change it to commercial condos,” Siegel said. “There is a great market for these condos here, and in time, more will happen. I think a lot of people are sitting back and watching how we do with the Chelsea Arts Tower and see what types of buyers we have.”
Expect more commercial condos in Chelsea soon, other brokers said.
Roxanne Betesh, vice president of Sinvin Realty Corporation, said she knows of projects on West 19th Street and others that will start within the next year.
“There are a couple of buildings that are going to be converted into condominiums in the high teens and 20s,” she said. “There is such a call for commercial condos — they are getting a lot of play in the West Chelsea area.”
“Some key buyers are going into the Chelsea Arts Tower,” she said. “The people who are looking to buy space are top gallery people who want anything that can be developed.”