NEW YORK – Three decades ago, Jack Berman was a young stockbroker in the Financial District, arriving to work in a crush of people crowding sidewalks, filling office buildings and squeezing into coffee shops. But when the workday ended, the streets became so desolate it was hard to find a cab.
“It was an absolute ghost town after 5 p.m or 6 p.m,” recalled Berman.
That’s not the case today. Many of the office buildings that surround the New York Stock Exchange have become luxury apartments and multimillion-dollar condos, catalyzing a neighborhood that now embodies the Big Apple’s famous moniker: A city that never sleeps.
Streets teem with workers and tourists by day, residents by night. A Whole Foods Market opened in January, and a Life Time fitness center shortly before that. Some of the city’s hottest restaurants and bars have set up shop here, too, likely to get even busier when a new performing arts center opens in the fall.
As remote work empties downtowns in Boston and other cities across America, the commercial real estate industry is looking at how the world’s most famous Financial District became a 24-7 neighborhood and whether the strategy of converting office buildings to housing can be replicated.
The short answer is yes, but if New York is any guide, it will take time, money, and tax breaks. In Boston, where downtown foot traffic is roughly half its pre-pandemic level and office vacancy rates hover at two-decade highs, the Wu administration is expected this week to unveil incentives to jumpstart office-to-residential conversions.
Lower Manhattan’s metamorphosis has been a generation in the making, spurred first by the early ‘90s recession and later the 9/11 terrorist attacks in 2001. City and state officials were intent on repurposing moribund office buildings and jumpstarting New York’s recovery after the collapse of the World Trade Center.
Spanning several mayoral and gubernatorial administrations, both Democrat and Republican, city and state leaders rolled out zoning changes, tax incentives, and government bonds to provide low-cost financing to developers. The measures were expensive – an analysis of one program pegged the cost at $92,000 per unit. But they helped convert about 20 million square feet of the Financial District into about 17,000 homes, according to a New York City Planning Commission report.
That represents a fraction of the city’s massive office market, but the programs were critical to changing the neighborhood, said Basha Gerhards, senior vice president of planning at the Real Estate Board of New York and a member of a task force that issued New York City’s office reuse report earlier this year.
“It is complicated, it is expensive, and it’s not a silver bullet,” Gerhards said. “But it’s important – from a neighborhood revitalization standpoint, from a housing crisis and affordability standpoint, and as a way to stabilize the commercial office market.”
Jack Berman’s family has played a big role in the transformation. In 1997, his brother Nathan founded a firm that buys office buildings and converts them into apartments. Jack left his job as a stockbroker to work for him.
At the time, tenants in Lower Manhattan were leaving older buildings — known as “Class B” and “Class C” properties in commercial real estate parlance — for gleaming skyscrapers rising in Midtown.
Nathan Berman focused on these older buildings, which could be bought at a discount. Like other developers, Berman was drawn not just by bargain prices, but also state and local programs to spur office-to-residential conversions in Lower Manhattan.
One program involved abatements — a reduction in property taxes — to developers who repurposed Financial District buildings. Another focused on revising zoning to make it easier to convert properties built before 1977. And after 9/11, the city and federal government offered additional incentives.
These programs have since expired, but Berman has continued to convert buildings, so much so that the New York media dubbed him the “conversion king.” Today, Berman’s Metro Loft Management has created more than 5,000 units of housing. The company is now renovating its 20th and 21st buildings.
While the conversion process is expensive, Berman said, it is one-third cheaper than building from the ground up. It’s also faster, taking as little as 12 months compared to years for new construction.
A 30-story Metro Loft building on Broad Street, which is next to the New York Stock Exchange, was renovated in about 16 months. The 1950s property was mostly vacant when the Berman brothers took it over in 2018.
Today, with 533 rental units, the building has been reborn as “Twenty Broad” and marketed as “mid-century modern style” with oak flooring, Italian cabinetry and quartz countertops. Amenities include a rooftop terrace, game room, gym, and coworking space. A former vault in the basement is now a pool room.
The building caters to well-heeled young professionals — think investment bankers. A 550-square-foot one bedroom rents for $4,600 a month, and the building is close to being fully occupied.
“To date, we have done anything and everything with conversions,” said Nathan Berman. “We’ve moved elevators, we’ve opened up courtyards in the buildings, we’ve punched new windows ... we added buildings on top of buildings.”
Since 2000, the population of Lower Manhattan has tripled to about 65,000, according to The Alliance for Downtown New York, an advocacy group.
Perhaps the surest sign of the neighborhood’s desirability is the completion this spring of a ultra-luxury condo building known as One Wall Street, which also abuts the New York Stock Exchange. The 1931 Art Deco landmark — once the headquarters of Irving Trust and later Bank of New York Mellon — has been billed as the city’s largest office-to-residence conversion, a gut renovation of 1.2 million square feet by Macklowe Properties.
A one-bedroom unit overlooking the NYSE is priced at about $2.1 million. A four-bedroom residence commands about $12.75 million. What sets One Wall Street apart are extraordinary amenities: a 39th floor terrace and restaurant featuring harbor views of the Statue of Liberty, an indoor pool with skyline views and a Whole Foods that is an elevator ride away. Next year, the Parisian department store Printemps is planning to open its first US location in the building.
Manhattan is not done with office-to-residence conversions. The hybrid workplace has taken a toll in other commercial districts in the city, notably Midtown, which still runs on the 9-to-5 rhythm of the old Financial District. City and state leaders are once again discussing programs to incentivize developers to repurpose buildings.
Back in Boston, the design firm Gensler recently updated its analysis of underused office space that could be converted into residences. Using a sample of about 90 buildings, the firm identified 3-to-5 million square feet of space, primarily in the State Street corridor from Government Center to the Rose Fitzgerald Kennedy Greenway.
Like New York, Boston can become a leader in breathing new life into old buildings, drawing on the region’s experience of repurposing mills and industrial lofts, and its appreciation for preserving history and architecture.
Mayor Michelle Wu will need to relax zoning rules to make conversions easier and offer incentives to entice skeptical developers wary of high renovation costs. In a statement, her office confirmed the city is working with developers and said that “even a few conversion projects would make a big difference moving toward a 24-hour neighborhood in historic Downtown Boston.”
Yet the burden can’t be City Hall’s alone. Downtown Boston is not only the heart of the city, but also of a metropolitan area of nearly 5 million people, if not all of New England. The state should consider a stimulus package of its own, while the private sector needs to step up. Who will become Boston’s conversion king (or queen)?
The vitality of Boston’s downtown should matter to everyone. Its transformation won’t happen without everyone involved.
Shirley Leung is a Business columnist. She can be reached at email@example.com.