Why Nonprofits Are Taking More New York Office Space

Stephen Powers is the co-founder of Open Impact Real Estate, a commercial real estate services company specializing in mission-driven organizations. Powers represented Rising Ground in the deal, and noted that 420a reduced its rent for the lease by around 25 percent.

“If you have a lease for longer than 30 years for a property that’s 100 percent leased by the nonprofit and is created inside of a condominium, then you’re able to apply to the Department of Finance to get the taxes taken out,” said Powers. “For regular commercial real estate rent, the taxes are approximately 20 to 25 percent of the rent you pay.”

Nonprofits are increasingly seeking and taking new space, driven by the surge in availability due to fallout from the COVID-19 pandemic and the exciting opportunity for tax relief engendered by that 2019 memorandum.

OPEN Impact’s own data shows that “the mean increase for large nonprofits in 2023 versus 2022 on occupancy expense was 5 percent, outpacing typical 2.5 to 3 percent annual increases.”

Examples of the embrace of 420a are increasingly plentiful.

In February 2024, Powers and Open Impact, along with Transwestern Real Estate, represented Selfhelp Community Services, a nonprofit that serves elderly and vulnerable adults, in securing 45,689 square feet at 1180 Avenue of the Americas for its new headquarters. 

Occupying the building’s second and third floors, the transaction was structured as a 30-year leasehold condominium, which eliminated the organization’s real estate tax burden.

At the time, Stuart C. Kaplan, Selfhelp’s CEO, said in a statement that the deal supported the organization’s “broader real estate and financial goals,” and that the structure of the lease “will not only reduce our tax burden but also provide us with a high-quality, custom-designed space that supports our community members, both staff and clients, and meets our unique needs.” 

This past June, Imagine Me Leadership Charter School signed a 30-year lease for 63,000 square feet, the entire building, at 39 Truxton Street in Brooklyn. The deal employed a leasehold condominium structure, and was brokered by Open Impact.

Also taking advantage of the leasehold structure in 2024 was the Paul Taylor Dance Company, which relocated its headquarters in January from the Lower East Side to more than 31,000 square feet on the ninth and 10th floors of 307 West 38th Street, thanks to a 30-year leasehold condominium agreement with landlord George Comfort & Sons.

These deals have been expanding overall since the 2019 DOF memorandum. In 2020, Open Impact brokered a 39-year leasehold condo for Bold Charter School in the Bronx, which took eight stories totaling 81,590 square feet of ground-up construction for a build-to-suit school.

And, in 2021, CBRE (CBRE) negotiated a 30-year leasehold condominium for the Legal Aid Society so it could consolidate four smaller offices into one 198,000-square-foot hub, with a dedicated entrance at 49 Thomas Street. 

The increasing embrace of 420a also assists nonprofit organizations in expanding their real estate dealings because it reduces hassles and expense on the owners’ side.

Suri Kasirer is founder and president of the New York City lobbying firm Kasirer, which works extensively with nonprofits to obtain government funding. The firm helped nonprofit clients raise $24.8 million in capital funding for fiscal year 2025. 

Kasirer notes that at a time when office owners have struggled to find tenants, nonprofits have become a desirable target to fill their space.

“We represent every major player in the office space, including Silverstein, Related, SL Green and Brookfield, and all of them are looking for not-for-profit tenants because of all the changes going on in the business world, where people are not coming back to the office in the numbers that can fill a major commercial building,” said Kasirer. “So they are more and more looking to not-for-profits.” 

Dan Berman, a partner in the real estate division of Kramer Levin who represents numerous not-for-profit organizations in development deals with a focus on religious organizations, said that in many ways nonprofits are ideal partners right now for owners seeking to fill empty space.

“There are a lot of spaces that are vacant on street level which may have a couple of floors also behind it, and those spaces are a real drag on the building,” said Berman. “If it’s a condo building, that vacant unit isn’t contributing its share of the costs, creates an unattractive situation on the ground floor, and detracts from the value of the building overall. It’s also a drag because there are real estate taxes payable. The best shot is to have a not-for-profit that’s tax exempt come in and occupy that space, which relieves the tax burden.”

Samantha Sheeber, the managing partner at law firm Starr Associates, explains that in addition to eliminating the tax burden on the occupier side for nonprofits, 420a has made the process of establishing a leasehold condominium so much simpler than it used to be due to the requirement for an ownership interest.

The establishment of 420a “allows the Department of Finance to now look at these transactions from an ownership standpoint,” said Sheeber. “The old way was much more complicated, much more onerous — having to take your building, lease it to an affiliate, do an entire leasehold condominium and then sell, because a leasehold condominium is an ownership interest. What the new DOF guidelines provided is that you no longer have to do an actual purchase and sale. What can be done now is, if I’m a building owner, I create a fee condominium.”

Powers noted that 420a can also help constrain transaction costs on the creation of a leasehold condominium, from previous costs of roughly half a million dollars down to around $75,000. 

And Berman pointed out that the tax savings due to 420a do not exclusively benefit nonprofits. A portion of the savings can be negotiated with the property owner. 

“You get a real estate tax exemption, and that can be shared,” said Berman, who added that as of late December he had seven real estate deals in the works between developers and not-for-profit religious organizations. “That’s what the not-for-profit can contribute. The building owner loves it because it reduces their taxes, completely abated for that base. The not-for-profit is adding value in that capacity to the building. It’s not just signing a lease with a tenant who’s going to pay a share of real estate taxes. It’s actually going to abate taxes.” 

David Brown spent 35 years as the head of real estate for the Archdiocese of New York before becoming a consultant with GRB Consulting in 2021. Brown noted that while the larger class of nonprofits — Columbia, New York University, and numerous religious organizations like the one he used to represent — remain some of the more dominant owners of real estate in the city, the recent disruptions in the market have proved to be a boon for smaller organizations seeking to expand their physical presence. 

“Smaller institutional not-for-profits are finding it much more affordable to lease commercial space today,” said Brown. “There are a lot of Class B and C buildings all over the city, and those buildings are being forced to lower their rental rates such that a small not-for-profit can create a good functioning workspace at rental amounts that probably haven’t been seen in 25 years.”

But while nonprofits are taking advantage of these recent opportunities, this is not to say that all have escaped the days of office disruption and uncertainty.

GFP Real Estate dedicates around 3 million square feet of office space to nonprofits every year, providing them with affordable rents. GFP Chairman Jeff Gural said that he’s not seeing the groups he works with clamoring for more or newer space.

“The biggest problem I’ve seen is that because of the nature of a not-for-profit, it’s easier for them to allow their employees to work from home,” said Gural. “So some of my existing tenants, when they renew, are downsizing. It’s not unusual for them to ask us to allow them to reduce the amount of space they have when their lease comes up, and they don’t mind leasing less space because it saves them money.”

For those seeking to expand or take on new space, Berman said they appreciate the leasehold structure — especially since more deeply committed steps, such as a full-on joint venture, could potentially put a nonprofit’s land at risk.

“There’s been a lot more scrutiny of these types of transactions over the last few years because there have been really bad outcomes in several instances,” said Berman, who cited Marble Collegiate Church as an example given the collapse of a deal with HFZ Capital Group. (The centuries-old church found itself on the hook for part of a loan for a new NoMad tower it had partnered on with the troubled HFZ.) “I would only do it as a ground lease when I represent a religious organization because a joint venture could destroy them.”

Still, nonprofits could well become a larger portion of the overall mix of New York City real estate transactions, in part due to that 30-year leasehold condo arrangement.

“The concept has always been that nonprofits don’t pay real estate taxes,” said Gural. “That puts certain nonprofits at an advantage if they were big enough to buy a building. But other tenants don’t have the resources to own their own space. So the city came up with the idea for the 30-year condo, and that has been very helpful to nonprofits.”