Office-to-Residential Pipeline Restarts After Summer Structural Scare
New York’s office-to-apartment conversion activity has resumed after a July structural failure at the former Pfizer headquarters building halted projects and triggered citywide inspections. Buildings Commissioner Ahmed Tigani said the city has issued initial construction permits for 16 new projects since the accident, which caused two structural columns to buckle under newly added floor space. The city inspected 180 construction sites tied to companies working on the Pfizer building, including 24 conversions, and found no structural problems posing immediate public danger. Work has now restarted at the Pfizer site itself, where developer MetroLoft completed installation of new steel supports to replace damaged columns.
The accident set off scrutiny from lenders and developers reviewing their conversion projects, with investors examining sponsor experience more closely, according to BH3 Management principal Adam Falk. One new project will convert a 24-story downtown Brooklyn office tower completed in 2023 that never leased to tenants; BH3 and Capstone Equities bought the property at a discount and secured financing last month. The venture expects to complete the conversion in 18 to 20 months, compared with four to five years for ground-up construction. One-bedroom apartments in comparable Brooklyn buildings rent for about $5,000 monthly.
The city expects as many as 12,000 apartments from office conversions in coming years as part of its strategy to address housing shortages. Rising interest rates and construction costs have complicated project economics, while a recovering office market is giving some owners reason to reconsider conversions. Northwind Group founder Ran Eliasaf said the pace of new conversions will likely slow as developers exhaust the supply of buildings best suited for redevelopment, though his credit fund recently financed two conversions and has two more Midtown loans in the works.
The post Office-to-Residential Pipeline Restarts After Summer Structural Scare appeared first on Propmodo.
