By Hadassa Kalatizadeh

Manhattan’s Garment District is being eyed as a prime target for residential conversions, as highlighted in Gov. Kathy Hochul’s State of the State address.

The governor’s speech laid out a plan to add roughly 800,000 new housing units to address New York’s historic housing crisis.  The initiative includes making zoning changes to allow office to residential conversions.  As reported by Crain’s NY, the Garment District currently has an 18 percent vacancy rate for its 26 million square feet of commercial space.  The neighborhood, bounded by West 34th and 42nd streets and Fifth and Ninth avenues, is also expecting the vacancies in the area to increase in the near future, because numerous buildings in the area are from the 1920s and 1930s.  Office tenants generally pull out of such older buildings opting for newer buildings, and leaving those buildings abandoned.  As such the buildings are naturally good candidates for the residential conversions, which Gov. Hochul and Mayor Eric Adams both want to encourage.

While in theory, the conversions sound like a no-brainer, they are quite difficult to actuate because of the difficulties of zoning requirements.  Take for example, the prewar building at 260 W. 36th St., near Eighth Ave in the Garment District.  The prewar building sold for $33 million on Dec. 19, but turning the building into apartments is easier said than done.  As per Crains, a developer would probably need to lose 30 feet off the building’s size to comply with light and air zoning requirements.  “People approached us left and right about converting this building,” said Chris Varjan, senior managing director with brokerage Lee and Associates, which represented the seller in the 260W deal.

“But the development costs would be high, and this is not a luxury neighborhood, so it will be hard to charge enough for the apartments to cover those costs.”  Varjan added that the transaction, in which Quartz Realty sold the building for $400 per square foot, made it too expensive to allow for such a conversion.  The 10-story building, which boasts bay windows and rusticated stone sections, was built in 1907–  almost a decade before New York first made its first zoning codes. The building is built straight up maximizing space, but current zoning laws require buildings to narrow as they rise, similar to wedding cakes, so that they don’t overshadow the streets.

The 81,400-square-foot building has plenty of non-garment tenants including a theater, photo studio and architectural model practice. The building is now roughly 33 percent vacant.  Another third of tenants could be vacating as soon as their leases expire, as per marketing materials for the building.  It is assumed that the building will undergo some kind of renovation. The building buyers, Ouni Mamrout and partner Meyer Equities did not provide comment.

Older buildings, where the owners have little debt left on the property, would probably be able to sell for better prices, allowing for a conversion to be feasible.  As per Crain’s, even if this particular building at 260 W is not converted into a residential building, it will still benefit if the area adds more housing units.   “Residential is almost guaranteed to be successful,” said a fall report from the Garment District Alliance, a landlord-supported nonprofit. More housing “would improve the perceptions of the neighborhood and ultimately increase office demand,” read the Alliance’s report.