New York City’s manufacturing and industrial spaces face an existential threat from the State, as there is a proposal to override local zoning in NYC in order to permit conversion of office or hotel space into housing. These proposals could mean a permanent residential conversion of hotels and offices in industrial business zones and other manufacturing districts, putting operational and inflationary pressure on the businesses in those M zones.
Industrial businesses are vital to the functioning of NYC: as essential businesses, they have produced PPE and medical equipment, supplied food and other essential goods to New Yorkers, and managed the city’s waste and utilities during Covid-19. This sector employs over 500,000 New Yorkers in jobs earning an average of $65,000 a year, more than twice the average wage of retail, hospitality, or food service, often without the need for formal credentialing or advanced degrees. Industrial jobs are a lifeline for the people who have been most impacted by Ccovid-19 employing a workforce that is 80 percent people of color and 50 percent foreign-born. Going forward, work by industrial businesses will be vital to the production, supply, installation, and maintenance of the green technologies that will be at the forefront of both the city and state response to climate change.
Yet, even in a business environment as tough as the Covid-19 pandemic, the primary barrier to New York’s industrial sector has been the reality of real estate pressures, specifically the rezoning of traditionally industrial land in New York City for non-industrial uses. From 2005 to 2015 alone, the city lost nearly 18 percent of its industrial space to residential and commercial uses, loss that ultimately disrupts local supply chains, inflates the price of remaining industrial space to the point of unaffordability, and ultimately upends the viability of other industrial businesses and jobs.
In 2018, with the aim of preserving space and opportunities for job-intensive industrial and manufacturing businesses, NYC developed an important effort to limit the development of hotel uses in manufacturing zones. Specifically, they required developers to receive a new City Planning Commission (CPC) Special Permit to limit the construction of new hotels and motels in M1 light manufacturing districts throughout the city. The goal of this special permit was to limit the growth of additional hotels, after those that had already developed in many manufacturing zones in the decades prior, to stem the loss and functionality of the city’s remaining industrial space.
Given the needs of NYC to facilitate an equitable recovery, job-intensive uses of space, more space for value-added industrial services, and a need for real estate price stability, any further loss would signal to the market that the city’s Industrial Business Zones are unprotected, open to speculators, and would represent a permanent loss to the stock of industrial real estate and jobs.
While the need for affordable housing is certainly appreciated, this reaction to the real estate industry’s Covid-19 challenges will have permanent ramifications. The current bills in the NYS proposed 2022 budget that seeks to override the City of New York’s local zoning protections to permit the conversion of office and hotel space into permanent housing would have a particularly harmful effect on industrial areas, where the bulk of class B and C office space and hotels of this relatively small size are located.
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