It wasn’t long ago that Midtown South earned its title of Silicon Alley. Now, the neighborhood could be poised to undergo another shift, after an ambitious rezoning plan.
During the 2010s, Midtown South became the go-to destination for TAMI (technology, advertising media, and information) tenants, especially tech companies drawn in by the neighborhood’s old-school charm that is accentuated by many of its dated office buildings.
The trend — which persisted through the first quarter of 2023 — changed the neighborhood for good. Office rents shot up in the area, making the neighborhood the priciest sub-market in the city.
A wave of tech layoffs has cooled office demand in the TAMI sectors. Over the past three months TAMI firms have made up about 12 percent of Manhattan’s leasing activity, down from 22.5 percent in the preceding year.
Office demand in Midtown South fell during that same period, driving availability to 18.6 percent, compared to 18.2 percent citywide. Since March 2020, the area’s office market has seen negative net absorption of nearly 21 million square feet.
Amidst this backdrop, the city is embarking on a quest to rezone swathes of Midtown South, opening up possibilities for much-needed housing development. The move would allow for an additional 4,000 housing units in the neighborhood.
Ideally, many of those units would come from office conversions. But, there are still barriers to such conversions, including restrictions on which buildings can be converted and tax incentives for doing so. The city has already presented a solution to the former, while the state is looking into the latter.
Until such policies are enacted, the proposed rezoning’s goal of breathing new life into the neighborhood will remain at a standstill. If such policies are created, it could lead to Midtown South’s second major transformation of the last decade.
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What we’re thinking about: Developers across the city are waiting for legislation to incentivize office-to-residential conversions. Will such legislation ever come to fruition? Send a note to david.westenhaver@therealdeal.com.
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Closing Time
Residential: The priciest sale on Friday was $13.25 million for a condominium unit at 70 Vestry Street, 4D, in Tribeca.
Commercial: The most expensive commercial closing of the day was $21 million for a 13,800-square-foot retail property at 173 Spring Street, in Soho.
New to the Market
The priciest residential property to hit the market on Friday was $25 million for an 11,000-square-foot townhome at 120 East 78th Street, in Lenox Hill. Meredith Verona and Caroline Greiner of the Corcoran Group have the listing. — Matthew Elo
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A thing we’ve learned: The William K. Vanderbilt House at 660 Fifth Avenue was one of the most extravagant mansions of the Gilded Age. But it was also an example of groundbreaking engineering. A steel structure built beneath the house allowed for the construction of large, open interior spaces without any supporting walls. The innovation paved the way for the skyscrapers that would soon begin to pop up across the city’s skyline.
Elsewhere in New York
— New York City may have lost up to 78,000 residents last year, according to the latest census estimates. But the data comes with a major caveat: many recent migrants to the city were not counted in the data, meaning the drop off was likely much more modest. Still, the falling population wasn’t enough to slow rent growth, which hit another record-high in February.
— A subway passenger was shot in the head by his own gun after a verbal altercation with another passenger on Thursday evening. The NYPD identified the man, thanks to a video posted on social media of the altercation. Mayor Adams attributed the altercation to “severe mental health problems” and said he would push for legislation to hospitalize New Yorkers with such conditions.