Revitalizing the New York City Real Estate Market
Advisor: Mr. Matthias Heilbronn
Internship Location: B6 Real Estate Advisors
Onsite Mentor: Alex Woodlief
In the backdrop of a post-pandemic New York City, office vacancy remains at a high 20% due to decreased demand affecting commercial zones city-wide. This has resulted in landlords being left unable to monetize their pre-existing spaces and office-centered neighborhoods being left empty. Additionally, residential renters have struggled to secure housing due to low supply and high demand for affordable living spaces. The current mayoral administration has acknowledged these ongoing trends which are reflected in their MSMX proposal for a rezoning of Manhattan’s Midtown South. Midtown South, a primarily commercial neighborhood containing the Garment District and Koreatown, has received the brunt of the pandemic's lasting effects. Local governments' focus on Midtown South has prompted me to research “What efforts and approaches should be taken by local government and third parties to revitalize Midtown South’s diminished real estate market and liveliness. Additionally, how can these efforts be implemented to ensure sustainability without disrupting the neighborhood's cultural identity?” My research will be centered around an evaluation of the MSMX proposal. I will focus on analyzing the approach taken while critiquing its strategy in hopes of finding new avenues of expansion. I plan to complete this through a literature review, reading case studies, government codes, and industry publications, to develop a background in past revitalization efforts and their strategies. Following this I will review evaluative data-driven studies of various current and potential programs. Finally, I plan to use my onsite internship at B-6 Real Estate, a Manhattan-based real estate brokerage firm, to develop a deeper understanding of the Midtown real estate market and conduct certain stakeholder interviews, developing my understanding of various opinions held. This project has relevance to New York City and its future growth efforts as well as other cities facing similar issues regarding high residential demand and faltering industry.
Project Blog
Week 0: Introduction
Greetings everyone! My name is Dilan Mistry, and I have been at Basis Independent Brooklyn since the 5th grade. For my senior project, I will be researching what ways neighborhood revitalization efforts can be carried out through the case of Midtown South. My interest in the subject originated from a summer internship at a real estate asset management firm that was facing difficulties leasing a property located in Midtown South, inspiring me to delve deeper into the topic. For this project, I plan to review past literature, perform stakeholder interviews, and analyze data relating to commercial trends. For my on-site internship, I will be working at B6 Real Estate Advisors with Alex Woodlief (Director of Investment Sales) where I will provide support by completing tasks for the company as well as shadowing in on meetings. At the end of my project, I will produce a proposal detailing my plan to revitalize Midtown South as well as support the company by contributing to deals. Thank you for reading. For more information about my project, you can view my proposal here.
Week 1
Hello everyone, welcome back to my senior project blog! This week for my senior project I began my literature review focusing on the role that rezoning plans have in the revitalization of neighborhoods. To have a window into the thought process behind rezoning as well as its effectiveness and implications, I read and analyzed an MIT case study focused on the 2018 rezoning of East Harlem, a Manhattan neighborhood being rezoned to create new and affordable housing. Through a review of the effectiveness of the project, it was concluded that rezoning did not have as pronounced an effect on neighborhood occupancy as previously thought. Instead, this concluded that in the case of East Harlem, the most significant impact of rezoning is not increasing the number of new residential units, but requiring that a portion of those new units be made affordable through the introduction of the city's mandatory inclusionary housing program which I plan to research in upcoming weeks. Through my reading of the study, I was able to develop a general understanding of how rezoning has been used in the past in response to creating new housing.
To get an additional perspective and example of rezoning I reviewed the Department of City Planning’s proposal for East Midtown. This 2017 project was a revitalization effort by the city to save the region's office market during the pre-pandemic bull market by modernizing units to compete with other neighborhoods. Similar to Midtown South, this proposal focused on revitalizing a dying office market. Through this research, I was introduced to the concept of FAR (Floor to Area Ratio) which I plan on delving deeper into later in my research,
Regarding my internship placement, I have fallen out of contact with my advisor and am working on regaining contact to solidify my placement in the upcoming weeks.
Thank you for your time.
Week 2
Hello everyone, welcome back to my senior project blog! This week for my senior project I continued my literature review from the previous week continuing my research in rezoning as well as starting to research the different ways in which affordable housing is implemented.
Continuing my focus on rezoning I looked towards the MSMX rezoning plan which is the proposed plan to rezone portions of the Midtown South neighborhood to mixed-use spaces. The MSMX plan is currently viewed as the primary solution for midtown south's current economic troubles as it is focused on creating roughly 4000 new units of housing with around 1000 being labeled income restricted through the city’s mandatory inclusionary housing program. Through my research into this plan, I learned about VIH (voluntary inclusionary housing), a government program focused on creating affordable housing spaces through a FAR bonus, and MIH, mandatory inclusionary housing. During my review of the proposal I also came across the stakeholder engagement roundtables led by the Department of City Planning to garner feedback from community members, real estate developers, and businesses in the area. This tool will help during my stakeholder interviews as they provide a solid basis of what topics and concerns are of interest to those affected by Midtown South’s rezoning and revitalization
Having learned about MIH and VIH I performed a policy review where I went through the DCP’s publication of MIH and a DCP-led financial study on MIH’s performance. Through this, I learned about the role that MIH plays in promoting diversity in growing and evolving neighborhoods. I plan to continue my research of inclusionary housing to compare MIH and VIH and their applicability to Midtown South.
Concerning my internship placement, I am still working on regaining contact to solidify my placement in the upcoming weeks.
Thank you for your time.
Week 3
Hello everyone, welcome back to my senior project blog! This week for my senior project I continued my literature review from prior weeks finishing my research in rezoning, continuing to research voluntary inclusionary housing, and reading through stakeholder roundtables.
Concluding my research into rezoning, I researched a recently approved rezoning plan in the SOHO/NOHO area. This plan shares similarities with the intended Midtown South rezoning as they are both focused on producing more mixed-use spaces while also providing affordable housing. During my reading I came across the issue of under building, an occurrence caused by rezoning which can negative affect production of units on new developments. This concept and other drawbacks of rezoning will be the next subject of my research.
For my research into voluntary inclusionary housing I read through DCP published report on VIH. VIH is a unique option to creating affordable housing as it is permanent similar to MIH but provides an increased FAR to developers incentivizing allocation of affordable units. This “bonus” has made VIH attractive to developers making it a common practice in Manhattan and more “hip” areas of Brooklyn.
Lastly, to develop an effective interview process I read through the DCP MSMX roundtables featuring residents and small businesses, beginning to write questions that I could use for my own interview. I will continue writing these questions next week with the help of my on-site advisor, Alex Woodlief.
In regards to my internship placement I have regained contact with my advisor at B6 Real Estate and am set to start my on site placement on Monday of week 4 where I will aid my advisor in various tasks, sit in on meetings, and continue my own research under my advisors wing. My onsite internship will take place every Monday and Wednesday/Thursday.
Thankyou for your time.
Week 4
Hello everyone, welcome back to my senior project blog! This week for my senior project I began my onsite placement, continuing my research, and outlined my final paper.
At my onsite placement, I have been allowed to conduct my research under the guidance of my advisor helping me to organize my research. This week I continued my research in hopes of answering the question of how tax abatements can be used effectively in incentivizing developers to create more housing and affordable housing. My research introduced me to 421a, a tax code that allowed for a tax break upon creating a percentage of units in a residential building to be affordable based on AMI guidelines of the area. 421a allowed for the creation of new affordable units that would not have been constructed had the abatement not existed but were criticized for not doing enough. This abatement was well received by developers which caused disruption when it expired in 2022. Through conversation with my desk mate at the company, I was introduced to 485x which is a new proposed tax break part of Kathy Hochul’s new housing bill which is to be up for review over the weekend. 485x is not as well received by 421a but it is better than not having any tax incentive for developers.
Lastly, I planned out the contents of my paper to be focused on analyzing the approach taken while critiquing its strategy in hopes of finding new avenues of expansion. My paper will be organized in the following way: Abstract Acknowledgements Chapter 1: Introduction Chapter 2: Background of MSMX Chapter 3: Rezoning Chapter 4: Tax Abatement Laws Chapter 5: Inclusionary Zoning Chapter 6: Discussion Chapter 7: Conclusion Bibliography
Thank you for your time.
Week 5
Hello everyone, welcome back to my senior project blog! This week for my senior project I continued my onsite placement, researched, and began writing my final paper.
At my onsite placement, I had the chance to speak with members of the firm about Governor Hochul’s new housing bill that just passed over the weekend. This bill introduced adjustments to tenant protections, office-residential conversions, and renovation rules. This new bill has large implications for the revitalization of Midtown South due to its alterations of policies used to carry out the efforts. The highlights of the bill include the new 485x tax incentive and the lifting of the 12 FAR cap in rezoned areas. With these changes developers in Midtown South will be able to build upon their pre-existing properties. These new changes will benefit developers allowing them to create more units and do so cheaper. While this creates opportunity, an issue is that the base renovations for rezoning are very expensive for certain properties making the projected figure for units created an overestimate presenting a less optimistic view of the project's magnitude. To gain an estimate of how many buildings could take advantage of I plan to tour through the area planned for rezoning with my onsite advisor. Additionally, this week I began to write my paper beginning with the introduction and abstract.
Thank you for your time.
Week 6
Hello everyone, welcome back to my senior project blog! This week for my senior project I continued my onsite placement, research, and final paper.
During my time on-site I took a canvassing tour of the M-zone (manufacturing district) to look at buildings that would be eligible to rezone under the MSMX rezoning proposal. The buildings that I toured are primarily commercial buildings listed by B-6 Real Estate Advisors as well as some residential spaces. With the opportunity to view the interiors of these currently vacant and gutted spaces, I chose to focus on the floor plan with the intent of determining the applicability of a rezoning renovation. Through this I hope to estimate the number of buildings and spaces that would undergo a rezoning as well as the number of potential units produced.
The first property I visited was 18W 39th St., an office building previously leased by Lord&Taylor, that is currently left vacant and under new ownership. The building features a ground floor (now being renovated for retail proposal) and 10 floors of commercial space. A key feature that the building has is a side elevator. Having an elevator located on the side of the building as opposed to one in the center, is common amongst most office buildings but is not featured in many large-scale residential apartments as it requires more floor space to be allocated for hallways breaking up the space.
A primary feature that plays a role in determining if a building should be converted is the number and location of windows. Windows play a critical role in determining the possibility of creating housing as their presence is legally required when creating bedrooms. 18W 39th St. is representative of many of the office buildings in Midtown South that only have windows on the facade due to adjacent buildings blocking light access. This window shortage limits the number of possible bedrooms, affecting the number of units produced. Office buildings in Midtown south do not fit the frame of the high-density residential properties that the mayor's office hopes to create. Instead a loft-style floor plan would be more applicable.
In the upcoming week I will take a look at other properties and continue my analysis. Thank you for your time.
Week 7
Hello everyone, welcome back to my senior project blog! This week for my senior project I continued my onsite placement, research, and final paper.
During my time on-site this week, I continued my canvassing tour of the M-zone (manufacturing district) looking at buildings that would be eligible to rezone under the MSMX rezoning proposal. The buildings that I toured this week also are primarily commercial buildings, but not under the brokerage of B-6 limiting my access to the buildings. This week I chose to focus on the role of location as well as room for expansion and reconstruction of already existing structures.
The first building I took a look at was 152 W 36th St. This commercial building is positioned adjacent to a smaller manufacturing building that is underbuilt for its space meaning its owners could build on top of the current property. This would be the case had the building retained its air rights. Instead, their owner transferred this property’s air rights to 152 W 36th St. by allowing 152 W 36th St. to build higher. This height disparity leaves room for windows to be installed in the event of a rezoning without the risk of them being blocked.
A similar occurrence is present for 5 E 38th St, located on either side of a public outdoor space. The creation of these outdoor plazas is the result of a floor area bonus for developing a public plaza and is commonly found next to hotels and large office buildings in Midtown helping developers to build bigger. This space blocks the development of potential buildings resulting in windows on the sides of 5 E 38th St as well as the building to the pavilions left.
The last two buildings I looked at are what I deem to be prime candidates for a rezoning. 580 8th Ave. and 554 8th Ave are two corner buildings with large floor plans and windows on all sides making them ideal buildings to be converted. 554 8th Ave is an office building that has remained vacant after the pandemic specifically waiting for the MSMX rezoning.
In the upcoming week I will start writing my final paper. Thank you for your time.