Garment District Rezoning Would Profoundly Alter Manufacturing Enclave

These days, the garment industry employs about 2,800 people and accounts for just 1.8 percent of the district’s commercial space, occupying 735,000 square feet, according to a 2022 report commissioned by the Garment District Alliance. The organization, a business improvement district that represents local landlords and business owners, roughly defines the garment center as 35th to 42nd streets between Fifth and Ninth avenues. 

With residential rents hitting all-time highs in New York City, Mayor Eric Adams this summer announced plans to rezone the Garment District and finally allow residential conversions and new apartment buildings. For decades, these blocks have largely been reserved for industrial — and increasingly office and retail — uses, although a number of limited-service budget hotels have sprung up, too. 

However, the architecture from the garment industry’s heyday has remained, much of it in the classic tiered wedding cake style of the 1920s and 1930s that works well for residential conversions. Prolific commercial architect Ely Jacques Kahn designed a dozen buildings in the area, which are among the neighborhood’s more iconic Art Deco skyscrapers and loft buildings. 

Although the neighborhood has been ripe for a residential rezoning for decades, the pandemic really pushed things into overdrive. By the summer of 2022, Barbara Blair, the head of the Garment District Alliance, had spent two years listening to commercial landlords concerned that their office tenants might never return to in-person work. Office vacancy in the area had reached 18 percent, and asking rents for the district’s aging office stock had declined by 15 to 20 percent during the pandemic. 

Average asking rents for office in the Garment District fell to $48 per square foot, $23 less than the Manhattan average of $70 per square foot for Class B and C office, according to the Alliance’s 2022 report. Much of the Garment District’s retail is also geared toward office workers, and without them the blocks off Broadway and Seventh Avenue can feel like a ghost town. 

“If you have office tenants that aren’t coming back or are doing hybrid, how do you support the ground-floor businesses?” asked Blair. “These people have businesses from 9 to 7 but don’t go into the evening.” 

She added that the business improvement district had pushed for a residential rezoning back in 2018, when the de Blasio administration had lifted the 1980s requirement for commercial landlords to preserve manufacturing space when converting a building to office. Five million square feet of industrial space had already been illegally converted to offices between 1987 and 2018. And just 10 buildings had gone through the formal certification process for a legal office conversion while preserving the required amount of manufacturing space. 

“The city back then refused to discuss residential,” Blair said. 

But after the Alliance commissioned a rezoning study from BFJ Planning, Urbanomics and Perkins Eastman last year, it found a much more receptive audience with the current crop of local elected officials. Council members Erik Bottcher and Keith Powers were supportive, as was Manhattan Borough President Mark Levine. 

The Garment District remains overwhelmingly commercial: 26 million of its 40 million square feet of space is office, making up 65 percent of the built environment, the Alliance’s 2022 study found. Another 5 million square feet is hotels, and 2.4 million square feet is retail. There’s roughly 2.5 million square feet of residential—about 2,600 apartments—either new construction or grandfathered in from before the city crafted its 1961 zoning. If the area was rezoned and a new tax abatement incentivized conversions, transforming older office buildings into apartments could generate up to 3,200 units in a decade, the Alliance’s analysis found.

Blair’s one sticking point with Mayor Adams’s rezoning plan is that it doesn’t go far enough. She and some of the local building owners want the city to extend its rezoning area to the commercially zoned blocks between Eighth and Ninth avenues, from 34th to 41st streets. 

When the city rezoned that area from industrial to mixed-use in 2004, it mapped zoning that allowed both residential and commercial development. However, planners also kept a special Garment District rule that prevented buildings larger than 70,000 square feet from converting to apartments, hotels or offices unless the landlord could provide an amount of manufacturing space equivalent to what was being lost. In 2018, the city modified the zoning to allow office — but not residential — conversions in larger buildings. That restriction remains in place today. 

“There’s not enough manufacturing here to in your wildest dreams use all this space,” said Blair, who described much of the stock west of Eighth Avenue as “230,000-square-foot buildings with huge windows. They’re really appropriate for conversion. We’re hoping that City Planning will consider that corridor because it’s so important to lifting up both sides of Eighth Avenue.”

From 2005 to 2018, the city approved 29 new hotels on those blocks but just three sites for housing, totaling 976 apartments. 

“They’re not rezoning all of it and I think they should,” said Mitchell Korbey, City Planning’s former Brooklyn director and chair of the land use practice at law firm Herrick Feinstein. “There are places still zoned M that I think they should look at.”

The Midtown South Mixed-Use Plan, as the city has dubbed it, includes the industrially zoned swath of the Garment District between Fifth and Eighth avenues along with several more blocks southeast of Penn Station from 25th to 31st streets between Fifth and Seventh avenues. The Department of City Planning, for its part, claims that it does plan to remove the neighborhood’s prohibition against residential conversions as part of a separate zoning action — a citywide slate of proposals called City of Yes for Housing Opportunity. 

Brian Steinwurtzel, the co-CEO of GFP Real Estate, a major commercial owner in the area, said he was supportive of the rezoning. And he argued that the blocks between Eighth and Ninth avenues would work better than the ones between Seventh and Eighth.

“The building stock that is there is easier to convert, or it’s smaller and easier to take down in order to build new,” he said. “For smaller properties, demolition is not just less expensive, it’s the time. The cost of equity and debt is somewhere between 15 and 20 percent a year. So, in order for an investor to go forward with a project, they have to believe they will earn greater than a 20 percent return per year on the project. And every month you have to wait to start the project lowers your return.”

And, if the city wants to see a large number of residential conversions, there needs to be a tax abatement to offset the cost, Steinwurtzel said. “The low-hanging fruit will be converted or built quickly. The more complicated and longer projects may take longer or not happen without financial incentive or a collapse in building prices.”

Investment sales broker David Schechtman put it even more bluntly. 

“The Garment District used to be bustling with activity,” he said. “It’s now pockmarked with tourist hotels, some signs of life in really decent food and beverage, a handful of well-done buildings — but mostly antiquated office buildings with tons of vacancy. The only way to increase value and spur activity in that neighborhood is to legislate value into those buildings. Now, more so than ever, when values have declined and will continue to do so, some of these buildings are worth only the dirt on which they’re built, if that.”

Rebecca Baird-Remba can be reached at rbairdremba@commercialobserver.com.