NYC's Office-Conversion Projects Are Back After a Big Summer Scare — WSJ

What happened

After two structural columns buckled at the former Pfizer headquarters in July, New York City inspected two dozen other office-to-apartment conversion projects. The Department of Buildings found the accident was specific to that one building. Since then, it has issued initial construction permits for 16 new projects.

Confirmed

Global impact / market context

Cities want to turn empty offices into housing, and this shows the approach can continue after a serious accident. But slower permitting shows lenders and developers are now more careful, which means fewer projects may start and construction costs may rise.

Analyst inference

The accident and higher interest rates, which make borrowed money more expensive, have slowed property development across New York City. Work is resuming at the former Pfizer building, the largest such conversion with more than 1,600 units planned, after the developer installed new steel supports.

Analyst inference

What to watch

1. The city is still investigating the near-collapse at the former Pfizer building, and work there is beginning to resume after the developer lifted sagging floors and installed new steel supports. Confirmed
2. Watch whether New York City issues permits at a faster pace in coming months, since the current rate of 16 new projects is considerably slower than the first half of the year. Proposed
3. Watch whether lenders and developers stay cautious about conversion projects, because their heightened scrutiny could reduce capital spending on new housing and delay units reaching the market. Analyst inference

Evidence

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