MARKET SNAPSHOT
Hotels Closed by Submarket *
Submarket Properties Rooms Midtown West / Times Square NY New York City Area ** East River-Queens / Brooklyn West JFK / Jamaica Midtown South NY Midtown East NY Financial District NY La Guardia / Queens North Uptown NY Village / SoHo / Tribeca Rockland / Westchester N . Y .
Administration pursue different ways to provide asylum seekerrelated services that are more effective and cost-efficient than the city over-relying on contracts with expensive , forprofit companies .”
Dandapani noted with his organization there are no longterm leases and “ all contracts are terminable with 90 days ’ notice by either party .”
He expects most properties will return to the transient hotel business once the program is over . “ HANYC has no concerns as this is entirely a voluntary program that only underscores
10 47 26 28 11 1 3 6 4 3 1
3,112 3,006 2,726 2,422 1,949 1,025 909 609 509 190 103
Total 140 16,560
* As of October 2023
** Includes the entire MSA for New York ( all five boroughs ) and Long Island , Westchester , the Lower Hudson Valley and Northern New Jersey .
Source : CoStar
Vijay Dandapani , HANYC the fact that New York City ’ s hotel business has not returned to pre-2019 levels . Most hotels that are in the program jumped on it at its inception , which , again , underscores the previous point ,” he said , adding some of these hotels had participated in the shelter-in-hotel program during COVID .
The HANYC CEO acknowledged he ’ s seen increased interest by potential hotel owners / investors looking to scoop up hotels so they can get into the migrant-housing game . “ Yes , some ownership groups are actively working on buying hotels to convert them to the migrant business ,” said Dandapani .
“ For 2024 , I expect migrant demand to continue to be an appealing option for the hotels that have so far pursued that route ,” added Hennessey .
However , over the long term and with the assumption New
York ’ s migrant-housing crisis eases , Hennessey foresees temporarily converted hotels reverting to their highest and best use as lodging operations . “ Most hotels are not readily convertible to desirable residential apartments due to the city ’ s zoning and building codes . Some older properties that were already nearing the end of their economic life will likely become development sites or tear-downs , while newer hotels that are not functionally obsolete will return to hotel stock ,” said Hennessey . “ In many cases , the return to transient use from emergency housing will require major renovations , given the higherthan-average people per room and the 100 % occupancy , which limits management ’ s ability to perform routine maintenance .”
The number of rooms repurposed is double the 8,000- plus hotel rooms currently under construction , and Freitag reported those “ will come online over the next quarters , on the heels of the 4,000 rooms that opened over the past 12 months .”
MOVING FORWARD Navigating the network of New York City development takes know-how , gumption , time and , above all else , a lot of money . Hotel owners and developers were recently issued good fortune from the city after its clampdown on short-term rentals , namely , Airbnb . Local Law 18 is a quasi-death knell for short-term rentals in the city and a boon for hotels . It , among other things , prohibits rentals for less than 30 days and mandates that hosts be physically present while their properties are being rented .
It ’ s not all rosy for hoteliers ; of course not , it ’ s New York . Owners , developers and investors looking to build or expand a property beyond 20 % have to deal with the City Planning Commission and secure an approved permit ( also known as the Citywide Hotel Special Permit ) to be in mixeduse , commercial and other districts via a lengthy , involved process . According to the CPC , the review process allows it to ensure new hotels “ do not create significant conflicts with surrounding development .”
In considering of this , CoStar ’ s Freitag said , “ Overall , the reduction in inventory , coupled with the reduction in [ short-term-rental ] supply and the new normal of ‘ higherfor-longer ’ interest rates , will impact the supply pipeline — all taken together , it means that the supply picture in New York will be quite favorable once the in-construction properties are open . The higher expenses will make some marginal projects fall by the wayside , but this also spells opportunity for wellcapitalized developers with a long-term horizon .”
From his perspective , Dandapani sees the Special Permit as “ singularly unappealing ” for developers who may have to add months or years to their project to get all the clearances . “ That makes it hard to have a fair estimation
22 hotelsmag . com Jan / Feb 2024