The United States’ so-called Big Apple has long been the apple of real estate developers’ eyes. With some of the nation’s highest rental prices and an ever-growing demand for housing, there is a killing to be made in real estate in New York City. But as the business capital of the United States, experiences a surge in demand for office space, many developers find themselves compelled to switch their strategies and turn attractive real estate into offices.
New York-based developer Steve Witkoff was interviewed by the Wall Street Journal recently. Three years ago, he purchased a second-class office building overlooking the city’s famed Madison Square Park; now, Witkoff is on the verge of completing the building’s transformation into luxury condominiums. Looking back, he has some misgivings about his plans—“Tech firms have poured into this area,” Witkoff said. “I bet you today, we would have had a tough choice between a condo and an office building.”
Witkoff is far from alone—many developers are adjusting their strategies to accommodate the skyrocketing demand for space from tech and creative startups. New York’s older office buildings, which have long been a fertile ground for residential complex developers, are now being targeted by newer businesses.
The trend figures to continue, according to some experts. Cushman & Wakefield senior broker Josh Kuriloff is one of them: “The office market is starting to gain enough momentum in the next couple years where we’re going to see office market become a better value than residential conversion,” he said.
The city will have to strike a fine balance, meeting demands for more offices while still being able to accommodate the housing demands of a densely populated and ever-growing metropolis. And Kuriloff isn’t alone among those in the know—many are expecting the demand for offices to rise further in New York. “Ensuring that there is adequate office supply for growing industries is critical,” opined Thomas McKnight, executive vice president at New York’s Economic Development Corp. “At the same time, we want to make sure there are adequate housing opportunities.” And, as cheap Class B and Class C buildings are repurposed rapidly for non-office needs, the demand indeed will likely continue to surge.
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