There are yellow cabs honking and ambulances wailing, but the streets of Midtown East still feel quiet on a Friday evening, just a few minutes before 6 p.m.
Near Grand Central Terminal, a chaos of commuters descends to the subway and train, skirting the tourists. But within a few blocks, the sidewalks begin to thin out, until it’s just office workers in their khakis, button-downs and puffer jackets, briefcases in hand or backpacks slung over their shoulders.
More workers emerge from the new JPMorgan headquarters on Park Avenue. A man in a suit (without a tie) and a woman in gray exit through the revolving door, the first steps of their commutes scored by the rattling of a construction elevator on the side of the tower.
A few blocks away, on Third Avenue, the mix shifts to show signs of residential life. A woman jogs down the sidewalk. A couple is out for an evening walk, their baby in a stroller. A little girl in light-up sneakers rides her pink and purple scooter. But their leisurely start to the weekend is at odds with the less-homey ground-floor spots that populate the nearby blocks: a CVS Pharmacy, FedEx and Starbucks. A man dines alone in a Just Salad, while another has a solo glass of wine in a window seat at La Botaniste.
On Second Avenue, walking uptown from the former Pfizer headquarters on East 42nd Street, it’s harder to classify the crowd. A woman pushes her small dog in a stroller. A young couple wearing sweats carries a box of pizza home. A man, seemingly fresh from the gym in basketball shorts and a sweatshirt and toting two Trader Joe’s bags, walks past the Westside Market. A group of teenagers in leather jackets pass around a vape.
The blend of Friday evening ramblers signals a neighborhood in transition. Once an aging office district, Midtown East is on its way to becoming what one business development organization leader in the area dubbed a 24/7 live-work-play community, where employees walk between their offices and apartments, pausing for sit-down dinners or popping into ground-floor retail spots along the way.
It’s a vision of ideal Manhattan living that hasn’t historically been synonymous with Midtown, an area long associated with tourist-filled crowds and one that many New Yorkers joke about avoiding at all costs.
But that reputation is one developers are betting won’t hold. Some of the city’s biggest names in conversions, like Nathan Berman’s MetroLoft and the Vanbarton Group, are turning their attention to the area, planning thousands of new apartments as new office towers boost foot traffic. Multifamily developers bill the added commercial development as a boon for their prospects, raising some brokers’ hopes for prices per square foot reached by the projects.
“When you think of everything that’s been happening along Park Avenue and near Grand Central, this is going to feed right off of that,” said Joey Chilelli, a principal at Vanbarton, which is converting an office building on East 43rd Street into 400 apartments. “You’ve got all these new corporate headquarters going on, major employers and major investment. What better opportunity to deliver high-quality product and tap into those residents who work in those corporate offices.”
A neighborhood evolves
Rob Byrnes has worked with the East Midtown Partnership for more than 20 years.
In his time with the nonprofit, which is geared toward improving the district stretching from Second Avenue to Madison Avenue between East 48th and East 63rd streets, he estimates that he’s seen the population of the corridor increase fourfold.
On top of that growth, the population is set for a likely influx of new residents once a wave of new development projects across the neighborhood — and dotted along its periphery — is completed. Among them is MetroLoft’s massive conversion of the former Pfizer Building, which itself is expected to deliver roughly 1,500 units.
The neighborhood is also undergoing an infusion of commercial development, thanks to a re-zoning in 2017 aimed at replacing crumbling office buildings with shiny skyscrapers. JP Morgan plans to house 10,000 of its employees in its brand new tower, which opened last month. Earlier this year, CBRE inked a lease for 64,000 square feet at the all-glass Lever House after its $100 million renovation.
As Midtown East builds its residential contingent, it could extend the boundaries of such adjacent neighborhoods as the Upper East Side, blurring the lines between where one ends and the other begins. It’s a shift that’s already happening across the borough, which some say has increasingly become more homogenous, shedding the defining character and stereotypes that once ruled its neighborhoods.
“They’re not as differentiated as they used to feel when I moved here in the late ’80s,” fashion designer Thom Browne told the Wall Street Journal, referring to a migration of downtown businesses, including his own brand, to uptown neighborhoods like the Upper East Side.
Midtown East hasn’t quite reached its final form yet. It’s still largely a commercial district catering to office workers, building staff and commuters coming and going from Grand Central. Fast casual restaurants serving office workers still dominate the food scene, although it’s gradually attracting a more trendy crop of after-hours dining options, including such spots as the downtown Italian restaurant Rosemary’s, which opened on Third Avenue and East 50th Street last year.
What plays out in Midtown East — from apartment rental rates to new business investment — could also serve as a testing ground for Midtown South, which just had its own rezoning approved earlier this year and already has its first conversion project on deck. The blocks surrounding the Garment District aren’t slated for the type of office developments going up in the nearby area, but the emerging residential district will likely benefit from New Yorkers warming up to Midtown as a desirable place to live.
“That’s going to be the big sell” for the Garment District, said Robert Rahmanian, co-CEO of Real NY, the firm heading leasing at CSC Real Estate’s conversion on 300 East 42nd Street.
Rahmanian added that most of the projects the team is working on are in largely commercial areas, which he described as “not at the moment places where people want to live.”
But what those conversions may lack in trendy locations, they gain in square footage. Carving up office floor plates into apartments that meet the city’s code requirements is like solving a “Rubix Cube,” Rahmanian said, which means units are often larger than others in equivalent new development buildings, A unit listed as a studio at a conversion may have interior rooms that make it feel more like a one- or two-bedroom.
Life after rezoning
Midtown East got the green light for a makeover in 2017.
That August, the City Council approved a rezoning of 78 blocks in the neighborhood, a move that paved the way for developers to replace old office buildings with newer, taller towers in exchange for contributing to public infrastructure funds.
The measure was a hard-fought one, arising from concerns that the eastern edge of Manhattan’s leading business district would fall behind other areas such as Hudson Yards, which had been injected with shiny corporate headquarters and high-end retail in the years prior.
At the time of the rezoning, the city identified 16 sites ripe for a turnaround. Since then, seven of them have undergone or are in line for major alterations, The Real Deal’s analysis shows. Three of those buildings will yield a combined 1,700 residential units.
But the rezoning came at a tricky time for the office market — not just in Manhattan, but across the world. Just three years after the rezoning approval, the Covid-19 pandemic shuttered offices, and in the years immediately after, a new attitude toward in-person working threatened to keep office workers at home more often, if not permanently.
Yet the move to revamp the office stock in Midtown East still appears to be paying off, if JPMorgan’s massive new headquarters — and elimination of most work-from-home options — is any indication.
The pandemic “certainly presented a moment of uncertainty, but what we have seen is a strong rebound that has continued unabated,” said Dan Garodnick, City Planning Commission chair and the Council member who spearheaded the 2017 rezoning effort. “It is proving to be the plan we’d hoped it would be.”
Although the events of 2020 may not have deterred office development in the district, it did put the idea of more residential development on the minds of some of those in charge. Byrnes of the East Midtown Partnership, who was on the steering committee for the 2017 rezoning, said it wasn’t until the pandemic that he seriously considered trying to incentivize more residential development in the area.
“It was clear in the first years of the pandemic that we needed a residential population to sustain ground-floor businesses,” Byrnes said.
Byrnes wasn’t alone in drawing that conclusion. Developers also caught on, jumping on opportunities to convert aging office buildings into residential apartments, aided in the following years by a series of tax abatements under 467m that made conversions especially attractive.
In a report published in July, City Comptroller Brad Lander estimated that more than 4,000 residential units have been created from conversions in Midtown East since 2020.
Some of this development occurred within the bounds of the area selected for the Midtown East commercial rezoning. Since 2017, more than 3,500 residential units have been added in the zone or are in the pipeline, according to an analysis by TRD.
Then at the end of last year, the City Council passed the City of Yes for Housing Opportunity, a city-wide zoning amendment that eased restrictions on conversions, moving the year of office eligibility from 1961 to 1990. Since then, developers have been snapping up buildings in the area, with more plans to convert on the horizon.
“It’s just the beginning,” said Platinum Properties Co-Founder, Khashy Eyn, referring to the Pfizer building conversion. “If Nathan Berman is going somewhere, a lot more people will follow.”
Some liken the budding transformation to the Financial District, where thousands of apartments have been converted from office buildings. Indeed, developers have taken cues from the neighborhood that was a testing ground for the conversion math and Jenga-like division required to make a project pencil out. Major conversions such as 25 Water Street proved that office-to-residential projects could be lucrative.
Midtown East is, in many respects, an entirely different story. First, the wave of residential development is coinciding with an influx of office development, while the Financial District focused on residential only. Plus, Midtown East is a more established neighborhood than the Financial District, which is only just now seeing an uptick in the kind of retail and restaurant space necessary to sustain a neighborhood.
“Midtown is ahead of where FiDi was,” Eyn said.
Eyn pushed back against the idea that people would shy away from living in Midtown East because of the hustle and bustle associated with the corridor.
“You’re going to get very healthy, high rents in these Midtown East buildings,” Eyn said. “Manhattan is Manhattan. If you want to live in a residential neighborhood, I get it if you go to the West Village or Greenwich Village, but everywhere else you have a mix.”