Condominium and Rental Conversions in Manhattan: Trends, Financial Analysis, and the Role of 467-m

Industry News
Sep 4
5 min read

Executive Summary: Office-to-Residential Conversions & 467-m Impact

1. Conversion Trends

Key Insight: Office buildings converting to condominiums trade at >2x price per gsf compared to rental conversions ($591 vs $276).
Table: Condominium Conversion Prices
- Include Table 4 with pre-2020 vs post-2020 prices and weighted average.
Visual: Bar chart comparing weighted averages for rental vs. condominium conversions.

2. Financial Impact of 467-m

Stylized Model (per gsf)
- Conversion cost: $500
- Gross income: $75 → $64 (with 467-m)
- Property tax: $21 → $2
- Net Operating Income: $40 → $49
- Residual land value: $122 → $250
Visual: Side-by-side bar chart showing “Without 467-m” vs “With 467-m” for NOI and land value.
Callout: 467-m offsets rent loss from income-restricted units and boosts land values by 106%.

3. Case Studies

750 3rd Avenue
- 639 units, 563,940 rentable sq ft
- Residual value benefit: $98–115M
25 Water Street
- 1,320 units, 330 income-restricted
- PV of tax benefits: $434M; opportunity cost: $1.6M/unit
Visuals:
- Diagram comparing pre- and post-conversion gross vs. rentable square footage
- Highlight income-restricted units and rent discount per gsf

4. Property Tax Analysis

Sample: 12.2M gsf south of 59th Street
Tax Expenditures: $5.6B
Opportunity Cost: $5.1B
Visual: Map of Manhattan with Lower Manhattan vs Midtown South, annotated with tax expenditure and opportunity cost per region
Table: Present Table 7 with per-unit and per-bedroom opportunity costs

5. Market Implications

467-m accelerates conversions and increases feasible development range.
Pipeline could produce 17,400 apartments, 3,600 income-restricted.
Rent discounts account for 81% of opportunity cost.
Visual: Funnel chart showing office gsf → converted apartments → income-restricted units

6. Office vs Renovation Decision Frontier (3rd Avenue)

Stylized chart showing rent/occupancy frontier for conversion vs renovation
Highlight effect of 467-m in tipping decisions toward conversion

7. Key Takeaways

467-m promotes mixed-use neighborhoods and efficient land use.
Conversion pipeline addresses office over-supply while enhancing affordable housing.
Midtown conversions are more sensitive to 467-m; Lower Manhattan conversions may be overly incentivized.
Visuals: Summary icons (dollars, buildings, apartments) with callouts for impact metrics.

Transaction Data: Condominium Conversions

This table summarizes the transaction data for office-to-residential condominium conversions in Manhattan. The sample is relatively small, with only two pre-2020 transactions, but the key insight is clear: on average, office buildings converting to condominiums trade at more than twice the price per gross square foot (gsf) of rental conversions ($591 vs. $276 per gsf). This highlights the growing feasibility of condominium development as land values rise, even without additional incentives.

Address	Pre-2020	Price per gsf	Post-2020	Price per gsf	% Change
79 Madison Ave.			Reported	$579
89 Madison Ave.			6/14/2024	$445
101 Franklin St.	12/5/19	$1,017	6/27/2024	$478	-53%
115 7th Ave.	12/29/14	$1,345	1/4/2024	$507	-62%
175 5th Ave.			5/23/2023	$880
245 W 55th St.			6/8/2023	$449
419 Park Ave. South			8/19/2024	$451
609 5th Ave.			6/6/2022	$825
Weighted Average		$1,074		$591	-45%

Notes: Red denotes estimated values based on news reports. Transaction dates correspond to deed recording, except for 609 5th Avenue (SL Green press release). Certain buildings (e.g., 111 Wall St., 345 7th Avenue, 300 East 42nd Street) are excluded or require special note due to renovation plans or prior transactions.

Stylized Financial Analysis of 467-m Conversions

The 467-m property tax exemption incentivizes office-to-residential conversions by reducing property tax burdens and effectively buying rent discounts on income-restricted units. The analysis uses a simplified financial model for conversions in Manhattan south of 59th Street, assuming:

Conversion costs: $500 per gsf (excluding site acquisition, including financing).
Rentable-to-gross ratio: 75% of total gsf.
Unit mix: 56% studios, 32% one-bedroom, 12% two-bedroom; average market rent of $105 per rentable square foot ($79 per gsf).
Income-restricted rent: $42 per rentable square foot ($32 per gsf).
Operating expenses: $18 per rentable square foot ($14 per gsf).
Property taxes: 28% of gross income for market-rate; reduced to $2 per gsf under 467-m.

Table 5. Financials With and Without 467-m ($ per gross square foot)

Metric	Without 467-m	With 467-m	Difference	% Difference
Renovation cost	$500	$500	$0	0%
Gross Income	$75	$64	($11)	-14%
Operating expenses	$14	$14	$0	0%
Property tax	$21	$2	($19)	-91%
Net Operating Income	$40	$49	$8	21%
Residual ("land") value – Yield on Cost	$122	$250	$128	106%
Net Present Value	$168	$319	$151	90%

Source: NYC Comptroller analysis. Assumes no income from commercial or accessory uses.

Key Takeaways:

467-m reduces taxes more than the revenue loss from income-restricted units, enhancing residual land value by over 100%.
Income-restricted units account for $11 per gsf lost in rent but are offset by $19 per gsf in tax reductions.
Conversions become financially viable in markets that would otherwise favor renovation over conversion.

Case Studies

750 3rd Avenue:

639 units, 563,940 rentable square feet (761,384 gsf).
59% studios or junior one-bedrooms.
Total conversion cost: $663 per gsf.
Expected net operating income: $47.5–50.0 million; accessory income: $11–13 million.
Yield at stabilization: 6.5–6.8%, residual cap rate 4.5–5.0%.
Residual value could have been $98–115 million lower without 467-m.

25 Water Street:

1,320 units, 330 income-restricted (72% studios).
Construction started 2023; eligible retroactively for 467-m.
Present value of 467-m tax benefits: $434 million; taxes paid: $67 million.
Opportunity cost per income-restricted unit: $1.6 million; per bedroom: $2.3 million.

3rd Avenue Comparison:

830 3rd Ave. (151,000 gsf) slated for conversion; 850 3rd Ave. (575,000 gsf) for renovation under M-CORE program.
Stylized financials show that 467-m shifts the rent/occupancy frontier toward conversion, particularly for smaller, lower-depth buildings like 830 3rd Avenue.

Property Tax Estimates and Opportunity Cost

Sample: 12.2 million gsf south of 59th Street.
DOF market values FY 2025: $277 per gsf overall; $223 in Lower Manhattan, $331 elsewhere.
Projected post-conversion values with 467-m: $320–$350 per gsf; fully market-rate: $390–$426 per gsf.
Present value of 467-m tax expenditures: $5.6 billion.
Present value of opportunity cost: $5.1 billion (Lower Manhattan $3.8b; rest of Manhattan $1.4b).
Approximately 14,500 apartments produced, 3,600 income-restricted.
Rent discounts on income-restricted units account for 81% of opportunity cost.

Table 7. Fiscal Estimates (Present Value $)

	Lower Manhattan	Rest of Manhattan South of 59th	Total
Tax Expenditure	$3.1b	$2.5b	$5.6b
Opportunity cost	$3.8b	$1.4b	$5.1b
Income-restricted units	2,103	1,515	3,617
Income-restricted bedrooms	1,768	1,218	2,986
Opportunity cost per unit	$1.8m	$0.9m	$1.4m
Opportunity cost per bedroom	$2.1m	$1.1m	$1.7m

Discussion and Conclusions

467-m accelerates conversions and encourages the production of income-restricted units, particularly in Manhattan.
Conversions absorb excess office space while creating vibrant mixed-use neighborhoods.
The program’s cost largely corresponds to rent restrictions on affordable units; it also increases residual land values and developer returns.
The New York City post-pandemic office-to-residential pipeline could transform 15.2 million gsf into 17,400 apartments, with 3,600 income-restricted units.

Overall Implication:467-m plays a pivotal role in shaping Manhattan’s post-pandemic real estate landscape, supporting the transition from office-dominated districts to mixed-use neighborhoods, optimizing land use, and helping to restore the economic vitality of central business districts.