Coffee & Cap
Rates Podcast
09/29/2025: Episode 115:
Host:
Shimon Shkury
President and Founder, Ariel Property Advisors
Featuring:
Barbara Blair
President, Garment District Alliance
Featuring:
Howard Raber, Esq.
Director - Investment Sales, Ariel Property Advisors
HOST
Shimon Shkury
President and Founder
FEATURING
Barbara Blair
President, Garment District Alliance
FEATURING
Howard Raber, Esq.
Director - Investment Sales
*The following text has been automatically transcribed and may contain minor errors. For original content, listen to the podcast episode
Hi everyone, this is Shimon Shkury with Coffee and Cap Rates, the podcast that talks about real estate in New York City. And we have a special guest today, that's Barbara Blair, who's the president of the Garment District Alliance. Barbara, thank you so much for being here.
Happy to be here, thank you for including me. And we also have one of my colleagues at Ariel Property Advisors, our zoning guru, Howard Raber, who does a tremendous amount of business in New York City and in Manhattan specifically. Howard, thank you so much for being here as well.
Yeah, I always like talking to Barbara and you, Shimon. I'm sure Barbara is a lot more interesting than me. And we're gonna talk about that and start right there.
So we're gonna talk about the Midtown rezoning or Midtown South rezoning in general, and this is affecting the Garment District. But maybe before that, Barbara, you can tell us a little bit about yourself and specifically about the Alliance and what the mission of the Alliance is. Because I think some of our listeners here would be interested in that.
Sure, happy to. So the Garment District Alliance is a bid. It's a business improvement district and there are 74 business improvement districts in the five boroughs of New York City.
So they're all over the place. But essentially, the idea of a bid is to improve a neighborhood so that people wanna live or work there. And they're focused on business districts, not residential districts.
And so I was brought on board quite a few years ago now because I had a background. I had worked in the fashion industry sort of peripherally. I had worked for a women's organization that were all senior executives in fashion.
And when I came to this job, you really had to have an understanding of the fashion industry. So the neighborhood has changed dramatically, but the fashion industry has changed dramatically also. The industry, at one point, this entire neighborhood, every single building was fashion 100%.
And nationally, on a statewide basis and locally here in New York City, for the past 50 years, we've been losing apparel manufacturing, really every kind of manufacturing, but apparel manufacturing. And so as we saw manufacturing jobs declining in the neighborhood, we needed a new use group to come in to absorb the space that was becoming available. So even in 1987, Ed Koch did a special garment district overlay zoning to ensure that the side street buildings in the garment district would remain fashion manufacturing.
And the overlay zoning said that 50% of that space, or about nine and a half million square feet had to be preserved for apparel manufacturing. It never made a difference. Since 1987, we've lost 93% of the fashion manufacturing jobs in this neighborhood.
And even since 2016, we had between 4,500 and 5,000 jobs in apparel manufacturing. We're at about 2,700 now. And in the entire industry, which is design, manufacturing and sales, you only have about 13,000 jobs.
So before COVID, we had about 146,000 jobs in this neighborhood. Of those jobs, only 2% are in the apparel sector at this point. So one of the things that the ownership here has been very concerned with is when people started coming in, probably 20 or 25 years ago, that were non-fashion, they were all illegally occupying this space.
They weren't a permitted use. So we were trying to figure out how do we get this overlay zoning lifted so that we could have legitimate business-to-business services and other users of the space. It's about 40 million square feet of space in the Garment District.
In 2018, we were finally successful in getting the overlay lifted so that other business sectors that were in these buildings were legal, except for we still had an area that was manufacturing. And when the city started looking at the City of Yes for Housing, and when housing became such an overarching priority for the City of New York, they started looking at manufacturing districts in Midtown Manhattan. And of course, we were one of four quadrants that the city rezoned to allow manufacturing to residential conversions.
The rest of the district was picked up by the City of Yes for Housing. So a lot of our avenue buildings and buildings that are outside of the manufacturing district could convert. So we completely embrace this plan, but I will say that there's been a very, very vocal group of fashion industry practitioners who have always been concerned about being displaced by development.
And by development, I mean the evolution of the neighborhood. I don't mean building buildings. And they've had a lot of sway with our elected officials.
And so in 2018, they came to the bid and asked the bid to require that in exchange for the zoning, subsidized workforce development programs and that sort of thing for the fashion industry. We did do that for four years. We're in year five.
Then the MSMX plan came along. We completely embraced it because we've been agitating for allowing residential since 2005. And with the MSMX, we completely embraced it.
It's 18 FAR, which is fantastic because it really creates an opportunity for owners to either convert or for new development in the neighborhood. But again, we had this outsized voice in the fashion industry and sort of at the 11th hour without the community boards knowing, without us knowing. Our local elected official made a deal with the fashion industry, and they excluded 37 buildings between 7th and 8th Avenues, between 35th Street and 42nd Street.
So that's a corridor that really matters to us in terms of having residential because it abuts 8th Avenue. And 8th Avenue is this incredible challenge to the Garment District. We have five harm reduction entities on 8th Avenue.
We have 16 shelters of one sort or another on 8th Avenue, but we're very, very hopeful that there's opportunity in this neighborhood, including in proximity to 8th Avenue, although taking these 37 buildings out of the rezoning is gonna have a negative impact, but we're working on that. But with Penn Station one day being redeveloped and Port Authority being redeveloped, you have the two anchors of 8th Avenue, and we really believe there's opportunity if there was a seriousness of purpose with the city and the state to close this sort of black hole in the middle that is dragging down the entire neighborhood. And we're actually doing a symposium with the Center for an Urban Future on this topic.
And Dan Garodnick is participating, and Carl Weisbrot and Vishaan Chakrabarti and others will be participating. So the challenges I would say are 8th Avenue, the opportunities are the transportation hubs. The opportunity for the neighborhood is bringing a new user and stakeholder group, which is residential into the neighborhood, huge opportunity, but there's a bump in the road because we have these 37 buildings that are excluded.
I should add that 37 buildings represent 4 million square feet of space. Currently, the fashion sector only uses in the entire neighborhood, 735,000 square feet of space.
Thank you. That's a great overview. And it looks like the Garment District doesn't have much garment anymore. Not much.
It's just the district. And with that, we spoke a little bit about the rezoning. We spoke about the challenges.
Why don't we try to talk a little bit about the opportunities? What makes the rezoning great for New York City? What makes it great for stakeholders?
How do you see the area developing there and where we are in the process in general? So I would say that the opportunity is huge. First of all, for New York City, we need housing, period.
And we need it at all levels. There's a huge amount of space where that opportunity exists here in the Garment District. But I will also say, from the Garment District, you can get anywhere in the world.
And I mean that literally. Between Penn Station and Port Authority, you have not only regional transportation, you have Amtrak that goes everywhere in the United States of America, and you also have the shuttles that will bring you to Newark Airport, will bring you to JFK and to LaGuardia. So you really don't need a car in the Garment District.
And as someone that works here and loves the arts, I frequently walk to Lincoln Center. If I'm going downtown to 14th Street or Gramercy Tavern or wherever, I walk. Broadway, you can walk.
So actually, if you like being in a central business district, it's a fantastic location because you can walk anywhere. I mean, just the other day, I walked over to the High Line and then walked down to Chelsea Piers to take a golf lesson in a futile attempt to learn how to hit a golf ball. So we'll see.
But the point is, you can walk anywhere. So that, I think, is a real advantage. But for the neighborhood, we look forward to having more eyes on the streets.
The residential will improve the ground floor retail because residents need a different kind of retail than grab-and-go food, which is pretty much all we have now, grab-and-go and banks. So the opportunity for the Garment District is huge, but it's also an opportunity for the city to really look at your most important transportation district in the entire city and think about how do we want to present ourselves to the people that are coming in through those two transportation hubs. And the other thing I would say is since 2005, we've had 54 hotels that have been built in this neighborhood, and they bring in 3 million visitors a year.
I love all these comments. I think you started with the statistics or the comment that New York City is undersupplied. And we know that by 2032, the city is going to be short about 500,000 units, which means that we need to produce about 60 plus thousand units per year.
We don't do that. We do 20, 30, maybe. The Garment District, with its 40 million square feet potential, that's three quarters of a year right there.
I've got to hand it, honestly, to this administration, not only for City of Yes for Housing, but for MSMX and for trying to think about how do you reactivate some of these neighborhoods and also answer a need that is so critical. I don't know if you have young kids. I have young kids that are in their 30s.
You know, where do you live? There's no place to live. Yeah, my young kids are still at home.
But you mentioned also the housing policy. You mentioned the MSMX, and I will mention the 467M that allows for conversions and tax abatements there, and the 45X, although it's not perfect, it allows for that. That comes from the housing policy.
So these are important things in conjunction with the City of Yes. You mentioned the transportation and how critical and how great it is to have it in the Garmin District and how beautiful of a residential neighborhood that could be and improve the city's look, specifically with the tourists that are coming here and pouring money. So we're all in agreement, and we're hopeful for everything to work out there, and investors are hoping for that too.
And Howard, I'm wondering how do you see the market from an investment perspective? We speak with buyers and sellers all day long and investors in general. So what is happening there from that sentiment?
As I think Barbara touched on, a lot of the emotion of investors, owners, and developers in different capacities. Developers always wanted to see, how do you make this work? You saw Hudson Yards come out of nothing.
It's like, well, why can't we do something in a better location with the transportation? Why can't we do this? The city tried with the hotel, when they allowed the hotels, the 10 years ago, they had oversaturated hotels without the residential components.
But now they're seeing this opportunity to come in here and take fresh product, fresh ideas. Look at what happened on the Upper East Side over the past 10 years. The community board got out of the way and you saw a lot of development happen up there.
And I think people see that opportunity now that the city's willing to work with them. One, the city of Yes, that's kind of proven the fact that the city's recognizing a need to streamline the process. The 45X is back online in terms of an abatement of some kind.
The 467M allows for using those existing office structures. You know, we know of a deal, we're actually working on the financing and the acquisition for the debt on a deal in the 30s, where you're taking a vacant office building and you're gonna put in 100 residential units. And that's something.
That's important, you know, to say, listen, you know, you're taking $35 rents for Class C office is what these buildings can generate if they're lucky, $50 if they're very lucky, right? Or you're vacant and now you're gonna take a building, same footprint, you're gonna use the 467M, make it residential, and all of a sudden you have $110 in rent and change the nature of that block. And then you have something there.
You have the hotels with the residential and you're gonna bring in better retail. So there's a tremendous amount of optimism. I think the idea of possible assemblages is real interesting to me.
That you take a lot of these dilapidated buildings, these older stock office buildings that are mid-block, that if they didn't allow you to take the buildings down, nothing would happen with these buildings. So now you could take these new assemblages, amass a lot of air rights and build something. Now you have to work within the confines of the city in terms of what's economically feasible, but the fact that you can build anything today, developers are very excited about that.
Thank you. And what do we see pricing is for the residential Prosper Buildable there, or generally speaking on a price per foot basis for deals in the Garmin district? Sure.
So I think it's interesting is that normally when you think of development, and everyone thinks of overpriced development sites, right, you're thinking about 400 a foot, 500 a foot, 800 a foot. What's gonna happen now with this Midtown South rezoning is that because of the mandatory inclusionary housing aspect of it, you really be building rentals. And that rental evaluation that developers will do will give you a much lower price per foot.
So I think you're gonna see pricing dip below that $300 a foot level, I would think, based on a lot of these underwriting conversations we're having with owners and developers. Because if you're not building condos, you have to support a basis that's gonna justify the $100 square foot rents that you're gonna be getting as opposed to a $2,000 sellout condo. So I think developers, one of the reasons why they're excited is that they can get property at a lower basis to build something more affordable.
Thank you, and I'm gonna go back to Barbara before we start wrapping this up and ask you if you had your wishlist and your organization's wishlist, what should happen? What should a courageous mayor, and we're right before elections, what would a courageous mayor that's thinking about New York City and thinks about its stakeholders, all stakeholders, developers, residents, affordable housing residents, businesses, thinks about the big picture, what should they think about when they think about the Garment District? So I think I agree with Howard.
There are a lot of these buildings that we have on streets that I think you call them 25-footers or whatever. You know they're the five-story tall buildings. Where we have three or four or five or six of these in a row, I'd love to see an assemblage, rip them all down, build a building, build housing.
A lot of the side street buildings will be more difficult to convert, but they're beautiful New York loft buildings, really beautiful. Most of them are in excess. There are 15 FAR right now.
They were built free restrictions on the FAR. A lot of those would make fantastic apartments. I think the city and the state has to get serious about 8th Avenue.
8th Avenue is a quarter, and Rishan Chakrabarty, who's an architect who looked at the Penn Station redevelopment, submitted his own plan. It was fantastic. He said, you have to have a grand entrance on 8th Avenue, across from Moynihan, as well as 7th Avenue.
That 8th Avenue has always been the back door. There's nothing there. It's awful.
A grand entrance on 8th Avenue, and then everything between Penn Station and Port Authority is redone, whether it's through signage enforcement and getting rid of scaffolding and improving the ground floor retail, which should come with residential. And then the other thing is the neighborhood, it's almost like it has a moat around it. You had the development of Times Square.
We thought it would trickle South, didn't trickle South. You had Hudson Yards. We thought we'd get back office, didn't trickle East.
So all these things. And I think that the city needs to think about how do you connect these neighborhoods with pedestrians and bikers? And an example is 37th Street, not a very attractive street, West of 8th Avenue.
That should become an incredible pedestrian corridor that brings you to the Jacob Javits Center. So I think the idea is how do you integrate this neighborhood with the Central Business District and stop thinking of it as a stepchild of Midtown Manhattan? You know, you can't get more Midtown than this.
We connect to everything and really sort of getting people to think about those connections so they think about how they can be using the neighborhood. You know what, I think it's a great point because the way to do that, I think this is a good stepping stone because if you get these developments online, the residential development, it's gonna take some of those older stock buildings out of the rotation. So now all of a sudden you're giving the office developers or the office operators a different motivation to get involved in the area and say, you know what?
Now we're gonna feed off the residential. So now you're working together, same way you're getting that live-work mentality and now you will bring that 24-7 kind of vision and then it'll bring other amenities to the areas. I think once you bring people in there, I think you're right, yeah.
Yep. So these are the incentives that we're looking for from our government, from our city officials, maybe from the state as well, the incentives to build more and build residential and maybe even persuade developers if it makes economic sense to build the plazas and the pedestrian walk-throughs and whatever we need there to make the neighborhood much more livable and to actually leverage that into our advantage. Any closing words from either of you before we wrap this up?
Not me, but thank you so much for inviting me. It was nice to see you both again. Thank you, Barb.