Office-to-Resi Surges Amid Changing Market Dynamics
New York City's real estate market is increasingly shaped by office-to-residential conversions. Developers are capitalizing on pandemic-fueled vacancies, declining office values, and a chronic housing shortage. Since 2010, about 5,500 residential units have been delivered via conversions, with another 19,000 expected in the pipeline.
Donahue Douglas, a $1.5 billion fund launched by Don Peebles and Doug McNeely, is targeting distressed offices in 10 U.S. cities for conversion. The venture has drawn strong foreign investor interest, with Peebles noting an opportunity to "produce outsized returns and valuable assets."
David Werner has been particularly aggressive in this space, securing contracts for 5 Hanover Square, 300 East 42nd Street, and a $90M loan with Metro Loft to convert 675 Third Avenue. He and Metro Loft are also converting the former Pfizer headquarters into 1,600 apartments.
Incentives like NYC's 485x program aim to ease conversion economics, but challenges persist: not all buildings are viable candidates, construction costs remain high, and existing tenants add complexity. Rising tariffs could further complicate cost structures.
Manhattan Luxury: Uptick and High-Stakes Listings
Luxury deals are making headlines. At 140 Jane Street, a $88M duplex penthouse hopes to set a downtown record. Nine of 15 units at the building have sold, including two penthouses under contract for $45M and $41M.
Sales activity also surged at 111 West 57th Street, and penthouses at 432 Park Avenue and 150 Charles remain listed north of $60M. The 80 Clarkson Street development from Zeckendorf and Atlas could push $2 billion in projected sales, with one penthouse asking $63M.
Citywide, 302 new development contracts were signed in March, including 53 asking $4M or more.
Airbnb Muscles Into NYC Politics
Airbnb's PAC, Affordable New York, is the top spender in this year’s NYC Council elections with $5M raised and $600K already spent backing pro-Airbnb candidates. The group hopes to ease short-term rental rules and plans more spending.
However, opposition is mounting. The Hotel and Gaming Trades Council warns Airbnb’s money "won’t influence candidates who know dollars don’t vote." Some mayoral candidates oppose Airbnb's push; others have remained silent as the PAC ramps up.
Ground-Up Development Pushes Forward
TF Cornerstone is demolishing 250-260 West 23rd Street in Chelsea to make way for 170 condos with retail and parking, expected by mid-2026.
Arcus Development is expanding and converting a shuttered parking garage at 220 East 9th Street into an 18-unit condo building set for 2026 delivery.
In commercial sectors, Prologis filed plans for a 500,000+ square-foot LIC warehouse, possibly ahead of special permit requirements that would complicate last-mile logistics.
Hospitality Rebound: Gurney's Gets $235M Refi
Gurney’s Montauk Resort & Seawater Spa secured $235M from Smith Hill and Bain Capital, following a recent reappraisal showing 15% value growth. The refinancing relieves earlier default concerns, with BLDG Management calling it a "one-of-a-kind property in a one-of-a-kind location."