The Midtown East rezoning deal struck between the New York City Council (Land Use Committee) and the de Blasio administration not only allows for new construction of approximately 6.5 million square feet of office space within the 78-block area around Grand Central, but is also intended to generate a minimum of $61.49 per square foot, or 20 percent of the air rights sale, toward public improvement projects including transit and public spaces.
The greater Midtown East business district is one of the most important commercial office centers in New York City and perhaps the world, with over 70 million square feet of office space and more than one quarter of a million jobs, according to JLL research. The district’s office product, however, averages 75 years in age, older than competing districts regionally and globally, making many of the 33 landmark buildings less appealing when compared to competitive properties.
The Midtown East rezoning plan allows development rights to be transferred from underbuilt landmarked buildings to any building in the submarket bordered by Third and Madison avenues from East 39th to East 57th streets. The plan increases the floor area ratio (FAR) to “incentivize property owners to redevelop their assets, thus increasing the density and quality of the office stock in the district and capitalizing on transportation network expansion efforts such as the East Side access,” says Anthony Ledesma, Managing Director with JLL Capital Markets, New York Investment Sales. It also “unlocks the estimated 3.5 million square feet of unused development rights from landmarked buildings, while requiring buyers to donate a percentage of the sale of the air rights to a public improvement fund.”
With the trend toward westward migration persisting in Midtown, particularly in the Hudson Yards/Manhattan West district, where demand for new (and more efficient) product has been strong, “the rezoning will allow Midtown East to remain competitive by spurring new development on the East Side,” says Tiffany Ramsay, JLL Senior Research Analyst. “This will especially benefit the Grand Central area which is home to older product and has lagged the larger Midtown market (in terms of rents and vacancies). The rezoning could shift some of this activity back to the East Side.”