Mayor Eric Adams’ goal of turning Midtown South into a live-work-play neighborhood with the help of office conversions appears to have an ally in one commercial real estate executive.
Walker & Dunlop CEO Willy Walker said the rezoning plan for the neighborhood would help prop up the city tax base, according to comments in an interview with Bloomberg, and despite challenges it could be the first of cities to see the light when it comes to flailing office properties.
“In New York and Boston and some other metro areas, there are mayors and city councils that realize that their tax revenue is going to decline precipitously unless they do something to enable the conversion of these buildings into functioning real estate,” Walker told Bloomberg.
Walker noted the transformation of Midtown South would be a boon for residents seeking more housing options and landlords who are struggling as office tenants flee traditional workspaces.
But even with the potential for 20,000 housing units, office tenants in part-empty buildings may be reluctant to part ways with their space completely.
“The process of buying out those leases is very expensive and often very difficult to do,” Walker said.
Adams last week rolled out a plan to rezone vacant offices in the district by way of the initiative, which also includes the creation of a multi-agency group to help weave through the enormous amount of red tape in the city.
The city will still need state approval for its conversion plan, according to Bloomberg. Adams is also calling for the state to craft a tax incentive for conversion projects, as many multifamily developers have shied away from projects that no longer pencil out after the lapse of the 421a tax break.
Walker’s firm is all too familiar with the struggles facing commercial real estate. While announcing layoffs for eight percent of employees in April, the chief executive said economic turbulence had lowered the firm’s outlook, but there were no plans to exit or “dramatically cut” any business lines.
— Holden Walter-Warner
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