CRE BizDevel Think Tank Hosts City of Yes Panel

New York City’s commercial real estate think tank and networking group CRE BizDevel held a panel discussion called “Unpacking the City of Yes: Zoning Reform and Its Impact on NYC Real Estate.” Leading real estate, architecture, legal and construction experts explained the new City of Yes legislation and its impact on the commercial and multi-family property segments in New York City, especially the rapidly growing commercial-to-multifamily conversion market.

BizDevel was established in 2015 as a business support group and think tank for professionals in the industries related to the commercial real estate market. The group’s members include real estate developers and brokers, finance and banking executives, builders and architects, suppliers, vendors, attorneys, marketing and publicity professionals and other consultants and suppliers. BizDevel holds frequent educational events, lectures, panel discussions and networking gatherings for both its members and the industry at large. Through joint projects, referrals, and new business initiatives, the group has to date generated in excess of $80 million in business opportunities for its members and their firms.

AnaTracey Hawkins, Director of Strategic Growth at L&K Partners and founder of BizDevel, moderated the discussion. Panelists included IMC Architecture Principal Eugene Mekhtiyev AIA, LEED GA; L&K Partners CEO John McCarthy-O’Hea; New York Building Congress President Carlo Scissura; Sheldon Lobel, P.C. zoning and land use attorney Richard Lobel and HKS Real Estate Advisors Principal Peter Carillo.

Hawkins said, “The success of the City of Yes is critical to numerous stakeholders in New York City – residents who suffer from a severe shortage of affordable housing, the design and construction industries who rely on the growth of the real estate sector, and the real estate industry itself which is struggling with both the consequences of the decline in demand for office space and the looming mortgage payments for loans obtained against equity prior to the pandemic. As a leading New York City real estate think tank, BizDevel felt it was critically important to discuss all aspects of this legislation, from financial to legal, design and zoning, as well as opportunities and pitfalls inherent in all wide-ranging legal undertakings.”

During the discussion, the panelists addressed how zoning updates are accelerating approvals and unlocking new opportunities; the push for adaptive reuse, sustainability, and higher-density housing; the challenges and roadblocks developers, architects, and construction managers still face; and what this means for NYC’s future real estate landscape.

Carillo said the City of Yes is NYC’s bold zoning overhaul aimed at unlocking housing, boosting the economy, and updating outdated land-use rules. “It raises development potential, streamlines the conversion of offices to residential spaces, and makes zoning language clearer,” he shared.

According to Lobel, this new legislation constitutes the most comprehensive zoning changes since the initial adoption of New York City’s Zoning Resolution in 1961. “These changes include more expansive manufacturing districts, new use group categories, increases in as-of-right floor area ratios (FAR) throughout most low- and mid-level zoning districts, the decrease or elimination of parking requirements, more permissive yard and height provisions, and expanded opportunities for residential conversions and transfers

Mekhtiyev stated that the new text amendments allow for a more creative approach to the design and distribution of floor areas. “The reduction in the rear yard for building portions under 75 feet in height, as well as the expansion of the amenity deduction to all multifamily housing types, requires creative solutions across newly proposed buildings. Furthermore, the ability to convert existing office buildings into residential spaces under an as-of-right scenario provides additional opportunities to inject housing throughout the city.”

“From a construction standpoint, the City of Yes means more opportunities for adaptive reuse projects where existing structures are modernized rather than demolished and rebuilt,” explained McCarthy-O’Hea. “All told, it will bring development to market in a shorter time frame. It also encourages sustainable construction by repurposing materials and reducing demolition waste, which aligns with NYC’s broader energy efficiency goals.”

From an investment sales perspective, Carillo said the new legislation is a green light for developers and investors that will lead to more opportunities to reposition underutilized buildings, especially in transit areas, resulting in more development activity contributing to the local economy.

The new legislation states that any building existing on or before December 31, 1990 is eligible for conversion. Currently, there is approximately 136 million square feet of underused office space across NYC, while statistics show the city will have a shortage of over 500,000 residential housing units by 2030. Although only 10-15 percent of offices are currently good conversion candidates, this number continues to grow. An October 2024 report from Ariel Property Advisors showed that, in the first half of 2024, acquisitions of office buildings suitable for conversions made up approximately 25 percent of the $2.2 billion in development sales citywide.

In addition to the housing shortage crisis, data shows there is a significant lack of affordable housing across the city. According to federal housing guidelines, a record high 53 percent of households qualify as rent-burdened, meaning they pay more than 30 percent of their household’s gross income for rent. Thirty-two percent of those households are severely burdened and pay more than 50 percent of their income total toward housing costs.

While the cost per square foot for conversion varies, McCarthy-O’Hea said it generally falls between $400 and $600, depending on structural, mechanical and facade modifications. High-end conversions, particularly those with luxury finishes and extensive structural modifications, can cost as much as $750 per square foot. Retrofitting HVAC, plumbing and electrical systems for residential use accounts for 25-30 percent of the total costs. “In addition to the financial considerations, developers must also factor in aspects like zoning compliance, fire and life safety upgrades, and potential tax incentives when assessing the feasibility of a building,” he said.

When considering whether a commercial property is suitable for conversion, investors should look for ones in a desirable location that offer efficient floor plates that allow for proper unit divisions, egress routes and natural light access, as well as spaces with a minimum ceiling height of 9-10 feet. The characteristics that make a building less desirable for conversion include spaces with excessive floor depth from windows that makes it difficult to provide sufficient light and ventilation in residential units, as well as those with sealed curtain walls or window systems that are costly to replace and may not meet residential requirements. Those with aging or failing MEP systems also would be more challenging, because if the HVAC, plumbing and electrical systems are either outdated or can’t be reconfigured without a full replacement, the cost may outweigh the financial benefits of conversion.

Mekhtiyev explained that there are multiple design and construction challenges and obstacles to navigate with the new legislation. “When talking about existing buildings, every structure will present its own set of challenges. Although the law text did a great job of addressing conversions from a zoning perspective, it did not address the challenges of converting existing buildings under the Multiple Dwelling Law as well as the Building Code. Architects will need to be creative in their approach to cost-effectively alter these existing buildings to comply with all applicable regulations,” he said. “The text amendments are still relatively new, and the industry is collectively learning. We are finding new items throughout the law on a daily basis. Since the legislation is so new, it becomes difficult to interpret certain portions of the resolution, since there is little to no precedent.”

McCarthy-O’Hea added that, while this new legislation streamlines some processes, approvals can still take time, which impacts project timelines. New York City’s ongoing construction demand may also lead to challenges in securing skilled labor and materials. While important questions about the application of the City of Yes in practice still need to be answered, all participants agreed that it will definitely benefit the city through construction of thousands of new residential units.

New York City’s commercial real estate think tank and networking group CRE BizDevel held a panel discussion called “Unpacking the City of Yes: Zoning Reform and Its Impact on NYC Real Estate.” Panelists included (left to right): L&K Partners CEO John McCarthy-O’Hea; HKS Real Estate Advisors Principal Peter Carillo; Sheldon Lobel, P.C. zoning and land use attorney Richard Lobel; New York Building Congress President Carlo Scissura; IMC Architecture Principal Eugene Mekhtiyev AIA, LEED GA and AnaTracey Hawkins, Director of Strategic Growth at L&K Partners and founder of BizDevel, who moderated the discussion.

Feature Image Courtesy of: Peter Wilk, Wilk Marketing Comm