First Round of M-CORE Recipients to Transform Underperforming Office Buildings in Manhattan

Implementing a Key Recommendation from the ‘New’ New York Action Plan to Help Re-Envision the Future of New York City’s Business Districts and Jobs Centers

NYCEDC Opens Second Round of Applications for Additional Awardees for M-CORE Program

Today, New York City Economic Development Corporation (NYCEDC) and the New York City Industrial Development Agency (NYCIDA) announced the first round of awardees for the Manhattan Commercial Revitalization Program (M-CORE). WSA Waterfront LLC at 175 Water Street and HPS Investment Partners at 850 Third Avenue, were selected as the first awardees of this innovative initiative that will support the renovations of aging commercial office buildings, and help transform New York City’s commercial business districts into vibrant 24/7 live, work, learn, and play destinations.

With M-CORE, NYCEDC and NYCIDA have incentivized owners to undertake investments which will improve the quality of Manhattan’s office stock, create desirable workspaces that will attract businesses and top talent, make necessary upgrades and retrofits to ensure compliance with Local Law 97, and introduce dynamic ground floor retail. Additionally, both projects have committed to including a full floor incubator or accelerator targeted towards high-growth industries such as technology, life sciences, cybersecurity, green economy, media and entertainment, digital gaming, and climate technology, among others.

M-CORE was a key recommendation from the ‘New’ New York panel’s Making New York Work for Everyone action plan – a set of 40 initiatives to reimagine New York City’s commercial districts as vibrant 24/7 destinations – transforming business districts into vibrant, resilient, and healthy neighborhoods, and remain globally competitive in attracting and retaining businesses. The Action Plan consisted of three major elements to help transform Manhattan’s commercial core:

1. Legislative and regulatory changes to facilitate the conversion of 20-30 million square feet of vacant office space to residential. Some of that work is already being undertaken through Mayor Adams City of Yes Housing Opportunity, while others continue to advance through the New York State Legislature and New York City Council.

2. Transforming the city’s urban realm with improved green and open space such as Broadway Vision and reimagining 5th Avenue’s retail core, from Central Park to Bryant Park.

3. And the final key element is to convert up to 10 million square feet from aging and vacant office space to amenity rich, high quality office space that meets the demands of the current workforce, which favors a hybrid work model. M-CORE targets buildings that are positioned to upgrade to higher quality office space, enacting the panel’s vision to invest in the City’s central business districts as engines of inclusive economic development.

“The New New York panel, a joint effort of the mayor and governor, articulated the clear and urgent need to deploy creative policies that accelerate the reinvention of New York City’s commercial centers and M-CORE is exactly one such policy,” said Deputy Mayor for Housing, Economic Development, and Workforce Maria Torres-Springer. “I am thrilled by the approval of the first two M-CORE deals and look forward to a future of revitalized, adaptable and dynamic office spaces that anchor downtowns where New Yorkers eat, play, work and study.”

“Aging and vacant office space is hurting landlords, small businesses, and ultimately the future economic success of our city,” said NYCEDC President & CEO Andrew Kimball. “Along with the conversion of vacant office space to residential and the transformation of our public realm, M-CORE is a key initiative of Governor Hochul and Mayor Adams New, New York Plan to re-imagine our commercial business districts into dynamic 24/7 destinations that are great places for people to live, work, and play. M-CORE will provide a critical shot in the arm for commercial real estate by facilitating the upgrade of underperforming offices into the amenity rich space that today’s workers demand.”

While return to office rates remains at approximately 60 percent for most New York City office buildings, in recent months higher performing office buildings are seeing higher amounts of foot traffic in their buildings compared to underperforming buildings – in some instances as high as 80 percent in a week. M-CORE will lead to the transformation of 10 million square feet of underperforming office space, helping drive positive ripple effects throughout New York City’s economy, particularly for local small business who serve those workers. Currently, nearly half – 255 million square feet – of office space in Manhattan represents underperforming buildings.

Recently, preferences for hybrid work, combined with rising interest rates and regional banking instability, have resulted in a slowdown of investment into the office sector, and created immediate challenges facing New York City’s commercial business districts, particularly Manhattan, which generates 58.5 percent of the citywide office and retail property tax revenues, and 45 percent of all jobs in New York City.

175 Water Street
Owned and operated by WSA Waterfront LLC and Milky 100 LLC, 175 Water Street (175 Water Street, New York, NY 10038) is a building that – once completed – will establish a new cultural community to the Lower Manhattan neighborhood. The building will be upgraded to attract and build a community of high growth fashion, arts, creative, and technology (FACT) tenants of varying sizes. After the work is complete, there will be approximately 45,000 square feet of retail, 425,000 square feet of office space, 73,500 square feet of creative makerspace, and 73,500 square feet of amenity space. 175 Water Street is a 31-story building with over 97 percent currently vacant. WSA plans to invest $150 million to demolish and rebuild all interior spaces and make public outdoor space improvements. The construction work will include demolition and new buildout of all interior spaces, significant investment in amenities, upgrading of building systems and energy efficiency improvements, enlargement of the ground floors and rooftop, renovation and indoor enclosure of the privately owned public space (“POPS”) at the ground floor, and development of new ground floor retail space.

The company will be required to enter into a lease with a business incubator, accelerator, or a significant high growth tenant as part of M-CORE.

Other highlights of 175 Water Street include:

• A conceptual department store spanning four floors that feature building tenant’s products in addition to showcasing other immersive retail experiences.
• Office amenities will include shared production facilities such as audio recording, podcast, photography, post-production, and extended reality studios; art galleries and film screening rooms used to showcase tenant artwork and host public events; numerous restaurants, bars, and a test kitchen; and health and wellness amenities.

850 Third Avenue
Owned and operated by investment funds managed by HPS Investment Partners, 850 Third Avenue (850 Third Avenue, New York, NY 10022) is a 21-story, 618,000 square foot facility. HPS plans to invest $62.7 million to renovate the facility into an attractive, transit-oriented, sustainable, fully-amenitized building with a greater street presence that will be attractive to a large variety of tenants. The upgraded lobby will feature new furniture, modern finishes, and retrofitted LED lighting. Food and beverage offerings are envisioned for the currently vacant retail space on the ground floor – part of an “open restaurant” concept with floor-to-ceiling windows that will maximize natural light, attract pedestrians, and enliven the streetscape. After investment there will be 10,939 square feet of retail, 592,681 square feet of office, and 5,500 square feet of dedicated amenity space.

Other highlights of 850 Third Avenue include:

• Ground floor renovations with a central lobby entrance and separate entrance for a future anchor tenant.
• HPS will also advance several key policy objectives:
• The creation of a 5,000 square feet childcare center will increase access to childcare in a neighborhood that lacks adequate resources of this nature and will help address the city’s shortage.
• Enter into a lease with a business incubator, accelerator, or a significant high growth tenant in a technology-focused industry such as cybersecurity, the green economy, and artificial intelligence, among others.
• New tenant amenities will also include green terraces on five separate floors and a new amenity center and conference space on the 21st floor that can host over 70 guests for special events.

These improvements will greatly improve tenant occupancy at the building, which has not undergone major renovation since 2008. Following the improvements, the building will have modern office layouts and offer significant tenant amenities, which are commonly sought after by tenants in today’s commercial leasing environment. HPS Investment Partners has also partnered with Cushman & Wakefield plc and Newmark Group, Inc. to lead leasing efforts. After the facility’s renovation, occupancy is expected to stabilize at 95 percent.

NYCEDC and NYCIDA will be considering new applications for the M-CORE program on a rolling basis starting today through April 15, 2024. The pre-application materials and submission guidelines are available on the M-CORE webpage.

About NYCEDC
New York City Economic Development Corporation is a mission-driven, nonprofit organization that works for a vibrant, inclusive, and globally competitive economy for all New Yorkers. We take a comprehensive approach, through four main strategies: strengthen confidence in NYC as a great place to do business; grow innovative sectors with a focus on equity; build neighborhoods as places to live, learn, work, and play; and deliver sustainable infrastructure for communities and the city’s future economy. To learn more about what we do, visit us on Facebook, Twitter, LinkedIn, and Instagram.