What Does It Take To Convert Office Space To Residential In NYC? Industry Experts From SOCOTEC Weigh In

Office-to-residential conversions have skyrocketed in New York City, with nearly 20,000 residential units in the pipeline in coming years, the most of any city in the nation.

It takes more than the flip of a switch for office owners to pivot their assets to residential use, however.

The existing asset must be reconfigured to accommodate structural modifications, residential zoning requirements and infrastructure upgrades, said Stanford Chan, senior principal at SOCOTEC, an architectural, engineering and life safety consulting firm.

“If an owner is looking to do a conversion, there's a technical feasibility phase that needs to happen to understand the upgrades that are required in terms of code, the envelope and the mechanical system,” Chan said. “Owners should look at the zoning first to see what's permitted for occupancy and floor area, then move on to the structural alterations.”

Bisnow spoke with Chan, alongside SOCOTEC’s principal of energy and sustainability, Andrew Graceffa, and principal of code and planning, Lori Boccadoro, about what it takes to reposition an office asset to residential use and the incentives available for these conversions, as well as the prime challenges these projects often face in NYC. 

Bisnow: What are the key factors that influence an owner’s decision to reposition their asset?

Chan: Due to the pandemic pushing many to work from home, building owners looked to residential conversions as a way to pivot and make their buildings usable again. 

Office-to-residential conversions are not easy. Building owners have to conduct an analysis to see whether their return on investment makes sense. The initial cost of construction, scheduling and getting the building occupied all have to be taken into consideration.

Bisnow: What city incentives are available for residential conversions in NYC?

Boccadoro: There is the Affordable Housing from Commercial Conversion tax incentive called 467-m. It provides property tax exemptions for conversions of nonresidential buildings, allowing for a 100% abatement during construction and 90% abatement postconstruction south of 96th Street and a 65% abatement elsewhere. 

If the project vests by 2026, the owner will receive a 35-year property tax exemption. If it vests by 2028 or 2031, owners will get 30-year and 25-year exemptions, respectively. Under this incentive, at least 25% of units also must be affordable, not exceeding 80% of the area’s median income. 

As part of the City of Yes legislation, there is also the ultra-low-energy building incentive. If a building is fully electrified and is performing 15% better than the energy code requirements, the building is eligible for a 5% floor area bonus on top of the floor area ratio cap that would typically be applicable. That can make a conversion project much more attractive.

Bisnow: How does SOCOTEC evaluate and/or upgrade existing mechanical systems for residential conversions? 

Graceffa: By and large, mechanical systems designed for commercial tenants will need replacement for a residential scenario. You're looking at very large retrofits or wholesale replacement of mechanical systems. Whether it needs to be retrofitted or replaced depends on the vintage of the building, different outdoor air and ventilation requirements, as well as where that building is in relation to electrification and its exposure to Local Law 97.

One thing that we advise our clients on is how to avoid having a stranded asset — doing a renovation and then exposing themselves, potentially five to 10 years down the line, to a system that is not able to be fully electrified. Transforming from steam to electric sourced by heat pumps also requires special attention to envelope improvements. 

Bisnow: What incentives are available for energy and operational carbon performance improvements?

Graceffa: There’s a multitude of local, state and federal incentives that are available to incentivize different portions of a project. NYSERDA incentives don’t necessarily have a direct carbon value associated with it, but they do have an indirect impact on the carbon value of the existing asset. Rather than directly incentivizing the reduction of operational carbon, they encourage electrifying the building and cleaning up the supply grid. By doing this, the expectation is that you're going to be reducing the overall operational carbon impact of the project. 

We try to leverage NYSERDA and Con Edison incentives as much as possible for our clients. We've been able to assist our clients in achieving millions of dollars of incentives, both for building electrification and reducing steam use. 

Bisnow: What are the prime challenges and opportunities when upgrading a commercial building’s facade for residential use?

Chan: With the envelope, there's natural light and air requirements. Commercial buildings do not have to provide natural air, so in terms of assessing a building for the feasibility and the opportunity of conversions, you have to look at the existing wall type and see what needs to be done in terms of compliance and upgrading for performance and aesthetics. 

If it's a vintage curtain wall-type building that we see a lot of in Midtown, you have to look at the existing framing to verify that you can upgrade structurally to residential use. This process starts by evaluating the structural impact to the existing building and then look at the opportunities for glazing — whether that involves overcladding, recladding or taking a more surgical approach to work with the existing glazing.

Many commercial rooftops are also designed for maintenance roofs. The opportunity, when you have roof setbacks, is to make them into amenity terraces. The key here is to look at the existing structure and see if it could be upgraded to a public assembly or accessory use, and then making sure that you have the right envelope, waterproofing and energy in terms of installation for these setbacks.  

This article was produced in collaboration between Studio B and SOCOTEC. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.