HOTEL TO RESIDENTIAL CONVERSION by Andrew Setiawan, Associate in Development Site Advisors
The global COVID-19 pandemic has undeniably transformed the way people live and work. The sudden drastic decline in airplane passenger traffic in relation to tourism and businesses has slammed NYC’s hospitality sector these past years. 4Q 2021 Manhattan occupancy rate was 69.2% compared to 30.1% in 4Q 2020 according to PWC lodging index. The surge in occupancy benefitted from the loosened COVID-19 protocols which enables hospitality and commercial sector to be more fully function. However, these numbers were still below the pre-COVID level where occupancy rates may reach north of 90%. Hundreds of city hotels were forced to close due to the pandemic and many of them are in the brink of filing bankruptcies where other numerous hotels are encumbered with debt while trying to stay afloat. Hotel owners and their creditors may incline to search for alternative uses for their buildings such as residential conversions. The current environment provides an opportunity for residential developers to convert older hotels to residential rentals and even condominiums. Non-residential to residential conversions is not a new concept as the regulation of such permit was already enacted back in 1981. Article I Chapter 5 “Residential Conversion within Existing Building” was adopted to allow conversions to certain buildings in specific areas and was enacted due to an increase in illegal residential conversion. This chapter is applicable for properties located in Manhattan CD 1,2,3,4,5 and 6, Brooklyn CD 1,2,6 and 8 and Queens CD 1 and 2 erected prior to December 15, 1961. In addition, properties in Manhattan CD 1 in the area south of Murray Street and its easterly prolongation and the Brooklyn Bridge erected prior to January 1, 1977. The regulation eases the zoning restriction for residential conversion of older or obsolete non-residential buildings that requires substantial reinvestment.
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