New York Gov. Andrew Cuomo has plans to convert empty commercial space in Manhattan into affordable housing, and the local real estate and hoteliers boards are aboard. In his 11th state of the state address, Cuomo on Monday proposed legislation that would open a five-year window for the conversion of office buildings and hotels into residential use.
"The housing problem in our cities has gotten worse. But the crisis of growing vacancies in our commercial property provides an opportunity," Cuomo said. "We should convert vacant commercial space to supportive and affordable housing and we should do it now."
The governor's housing conversion idea is part of a sweeping plan to reinvigorate a post-pandemic Empire State with a focus on improving air, highway, and rail infrastructure and broadband access, clean energy, and public health capabilities as well as address the real estate crisis caused by the pandemic that has killed about 32,000 people in New York state alone.
The governor's office says details will be provided in coming days, the New York Post reports, adding that officials believe state law would supersede any city zoning issues.
Realtors, hoteliers hail the idea as a way to help save central cities
The conversion idea won quick backing from both the Real Estate Board of New York (REBNY) and the Hotel Association of NYC.
Vijay Dandapani, the hotel group's president, told the Post: "The hotel industry is the most-stressed industry in the commercial property sector due to the near total evaporation of revenues since March 22. With no prospect of a meaningful revival for another three to four years, the governor's proposal that seeks to make it easier for owners and operators of hotels to maximize the value of their severely negatively affected assets will be welcomed by many."
Retail rents have fallen to historic lows throughout Manhattan, REBNY reported last week, adding fuel to the fire of concerns about workers and their employees fleeing central cities and super-expensive metro areas in general for greener pastures.
REBNY's president, James Whelan, called the governor's proposal "forward-thinking" and said in a statement: "As the COVID-19 pandemic has unfolded, New York, like (other) states, must reimagine how central business districts will succeed and thrive in the 21st century. New York will remain a global commercial hub by instilling a 24/7 environment in its central business districts, which will simultaneously strengthen its retail and small business sectors, create 'walk-to-work' environments, and provide much needed housing and affordable housing."
The Millionacres bottom line
New York is hardly alone. Plans for converting empty commercial spaces are also taking shape around the country, hotels included. Investors and every other stakeholder in government and private business may well be watching how this rolls out as they consider their own strategies.
Meanwhile, check out this piece -- "Converting a Hotel Into a Multifamily Asset" -- by Millionacres' Brad Cartier on some things investors should consider if mulling such a conversion. And, because the road not taken can also be the one you should, we commend to you this take from our own Maurie Backman: "Why 2021 Could Be the Right Time to Buy City Real Estate."