To Bill Rudin, the solution for Midtown’s vacant offices is clear: convert them to homes.
In an interview with Bloomberg this week on the state of the New York real estate market, the Rudin Management CEO was mostly upbeat about the industry’s pandemic recovery.
“You can walk around the streets, you feel the energy,” Rudin told Bloomberg’s David Westin. “Retail is back, people are out at the restaurants. It’s definitely a positive vibe.”
Rudin was even optimistic about the political outlook for accelerating conversions of struggling Midtown office buildings into apartments. He said the government would have to incentivize conversion projects with zoning changes and tax abatements. “The mayor and the governor really want to do this,” the executive said.
Rudin compared Midtown’s post-Covid office ghost town to the Financial District in the 1990s. To revitalize Downtown, the city fostered a public-private partnership to transform office space into residential units.
To be sure, some conversions are happening without the extra incentives Rudin called for. His own company embarked on one in FiDi at 55 Broad Street before selling the 30-story office building earlier this year.
Now under Silverstein Properties and Metro Loft Management, 55 Broad could become the city’s largest office-to-residential conversion with 571 market-rate apartments when construction is finished in three or four years. Metro Loft and GFP are planning an even larger conversion at 25 Water Street.
The largest office-to-residential conversion to date is Harry Macklowe’s One Wall Street, which debuted this year with 566 condo units.
But conversions of buildings with large floor plates, as are common in Midtown, are not financially viable unless the properties are sold at a substantial discount. Tax breaks would make them possible at higher prices, which would benefit major office landlords such as Rudin.
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Once the conversions are done, said Rudin, it wouldn’t be difficult to get people into them. “People want to walk to work,” he said. “Our [residential] buildings that are close in Midtown … those are usually the slowest to come back [from downturns]. This time around, they were the quickest to come back.”
Rudin said he’s seen strong demand for rentals this year, with occupancy rates near or on par with pre-pandemic levels.
On the commercial side, the chief executive said things are looking up from last year, citing several major leases that companies have signed for Rudin properties over the past few months.
The interview also touched on a topic that has been vexing New York real estate interests: crime. “Whether it’s really a problem or a perceived problem, it’s an issue,” Westin said.
On that, Rudin said crime needs to be addressed, but did not elaborate.
— Cailley LaPara