The city’s rezoning proposal has put 3.5 million s/f of air rights in play in East Midtown. It’s still unclear how the deluge will affect the air rights market in the district. However, the city is taking a hands-off approach on pricing, diverging from an earlier plan of setting a district-wide price on development rights in the area.
“The market will govern the pricing of those air rights,” said Council Member Dan Garodnick during the New York Building Congress Industry Breakfast Forum last week.
“There will be transfer of air rights from landmarks if somebody is looking to do a development. And a percentage of that will go to the public improvement fund to improve the pedestrian experience and the worker experience in East Midtown.”
Garodnick, who was the co-chair of a steering committee tasked with creating a framework to revive the commercial district, touted the new proposal, saying that it “strikes the right balance” between the interest of the public and the real estate industry.
The new approach contradicts an East Midtown proposal from the Bloomberg administration. In 2013, city officials revealed a plan that would set the price of air rights in the district at $250 per square foot. That set off opposition from real estate firm Argent Ventures, which owns air rights above Grand Central. According to the Wall Street Journal, the company said that the city undervalued air rights in the area. The firm argued that the price could be over $400 per s/f.
Garodnick also criticized the plan’s previous form, saying that setting a district-wide price for air rights “never made sense” to him. The Bloomberg administration withdrew the proposal due to lack of support from the City Council.
“There was an opportunity to simply buy air rights from the city at $250 per s/f. You can buy them at the same price at 39th Street and Third Avenue as 57th Street and Park Avenue, which really never made sense to me,” he said.
Thomas Kearns, a partner at Olshan Frome Wolosky LLP, said that allowing the market to set the price of air rights “made sense.” However, he said that it still hinges on an unknown factor — the city’s cut on air rights sales. “How much of the market will the city take? That hasn’t been determined,” he said.
Kearns also expects modest drops in air right prices due to the newfound wealth of alternatives for developers. “As a general rule, it will moderate prices. If you have air rights to sell, there will be some downward pressure,” he said.
Kearns’ optimism runs against the forecast of other real estate experts. A Crain’s report from last month said that the proposal would devalue air rights in the area to between $100 and $200. That figure would be below the Department of City Planning’s citywide average of $225 per s/f.
Carl Weisbrod, director of the city’s Planning Commission, told the Building Congress forum that he expects 5.5 million square feet of new office space to be built in Midtown East over the next 20 years.