New York, NY, USA

The office condominium of Visions/Services for the Blind and Visually Impaired, a nonprofit organization in SoHo, is not a typical Manhattan workplace.

Stone inlays in the hardwood floors serve as directional cues for those with canes. Diffuse lighting panels cut glare, enabling visually impaired visitors to see contrasting walls and furnishings. Staff members use an expansive kitchen with a washer-dryer to coach clients in life skills.

Because Visions owns its 8,000-square-foot space in a former industrial building at 500 Greenwich Street — rather than leasing it — the organization was able to customize the office with ease. And the benefits of ownership do not stop there.

“Now that we own, we don’t have to worry about being priced out of the market or spending most of our money on offices, as opposed to our program,” said Nancy D. Miller, executive director of Visions.

As the market for office space in New York City tightens and rents climb — while interest rates remain low — office condominiums are promoted as providing financial stability for small companies expecting little employee growth. Given the persistent popularity of residential condominiums, it seems logical that the city might embrace the concept of office-space ownership, which appeared as far back as the early 1980s but has not caught on here as it has in other parts of the country.

There has even been some recent development of office condominiums in prime addresses like the Chelsea Arts Tower at 545 West 25th Street; and at 125 Maiden Lane and 14 Wall Street in Lower Manhattan.

Yet, even as brokers say there is obvious demand on the part of nonprofit organizations, government agencies and some small companies to own their spaces, few real estate professionals anticipate a boom in office condominiums in the city anytime soon.

“In recent years, some owners have agreed to convert part or all of their buildings to commercial condominium space” on the premise that the parts are worth more than the whole, said David Lebenstein, director of the nonprofit division at the commercial brokerage firm Colliers ABR. But, he conceded, “it is still — no matter how you slice it — a very limited market.”

The Chelsea Arts Tower, a 20-story commercial condominium recently built in West Chelsea with floor sizes of 3,100 to 4,700 square feet, has attracted galleries and arts-related businesses, with units selling for about $800 a foot, said Alan Weisman, a senior managing director at Grubb & Ellis.

Mr. Weisman said the success of the tower, which was developed as a result of numerous requests from art galleries in the neighborhood for condominiums, is not a bellwether. “This is unique,” he said. “It was a clever thing to do for where we were on that site in that neighborhood for that type of user. I wouldn’t call it a trend.”

Also, in its design and appeal, the Chelsea Arts Tower is actually closer to retail space than office space, Mr. Weisman said.

The office condominiums created through renovations at 125 Maiden Lane and 14 Wall Street in the financial district have also attracted attention for their prime locations and sizes. Both have floor areas at the high end of the range typical in office condominiums in the city, which are about 5,000 to 25,000 square feet.

The owners of both buildings said they hoped to appeal to nonprofit organizations and government agencies. The Empire State Development Corporation, a state authority, plans to move into 125 Maiden Lane.

Spaces in the 350,000-square-foot Maiden Lane building, where current tenants have been offered the option to buy, range in price from $350 to $425 a foot, said Francis Greenburger, chairman of Time Equities.

Office condominiums in the lower floors of 14 Wall Street, which will be listed for $400 to $425 a foot, are not yet on the market. The developer, Leviev Boymelgreen, hopes to attract nonprofit organizations seeking security or companies that do not have the wherewithal to purchase a whole building, said Edan Shiboleth, director of the developer’s finance and investment group.

The company will also be marketing office condominium space at the base of 15 Broad Street, in the financial district.

Typically, small companies, perhaps doctor’s offices, accountants or architects, foreseeing little or no employee growth and trying to stabilize expenses might be candidates for office condominiums. But the biggest demand comes from nonprofit organizations, especially in New York City, which has more than 25,000 of them.

Nonprofits are exempt from city real estate taxes when they own, which can save $5 to $10 a square foot, said Mr. Lebenstein of Colliers ABR. Owning a space also provides continuity for nonprofits, which can be subject to income fluctuations and are often in danger of being priced out of rental buildings.

But office condominiums at prices around $400 a foot are out of the range of most nonprofits, said Suzanne Sunshine Mendel, vice president and head of the New York tristate region nonprofit practice group at CB Richard Ellis.

“If there was a product for $250 or $300 a foot, nonprofits could afford it,” she said. “But if you calculate a lease versus a buy, when you start getting up near $400 or $500 a foot, it’s not worth it for a nonprofit to buy if they can sign a lease in the high $20s or low $30s a foot.”

Several office condominiums being developed in Harlem may provide an alternative. They are an outgrowth of zoning that provides development bonuses when space is created for nonprofit or medical uses.

For instance, half the 60,000 square feet of commercial space at 345 East 102nd Street has been leased to government, social service or health programs, and now, the developer, Glenwood Management, would like to sell the balance, for around $350 a square foot.

“It’s advantageous to do a commercial condominium when you’re dealing with not-for-profits,” said Gary Jacob, executive vice president at Glenwood. “That’s why we’re selling the space.”

About Colliers International

Colliers International is a global partnership of independently owned commercial real estate firms. The organization's 9,141 employees span the world in approximately 250 offices in 51 countries. On a worldwide basis, Colliers manages 660,620,752 square feet, and has revenue of $US 1,174,664,792. For more information about Colliers International, visit our website at www.colliers.com.

Contact Information

David Lebenstein
212-758-0800

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