An office-to-residential conversion in Manhattan? That’s so 2023. What about an office-to-hotel conversion?
Kensico Properties proposed converting 509 Madison Avenue in Midtown from a 21-story office to a 30-story hotel with ground-floor retail space, Crain’s reported. Nabil Chartouni’s firm filed a rezoning application with the Department of City Planning.
The conversion plans call for 96 hotel rooms, as well as a lobby and amenity spaces, all stretching across 139,000 square feet. The retail space would occupy 3,300 square space and have separate frontage from the hotel.
A decade ago, it wasn’t even clear if Kensico would be holding on to the property. In 2017, it put its leasehold of the office property on the market, despite high occupancy rates remaining strong. The leasehold never sold.
Tenants at the building today include investment firm Banyan Tree Capital Management, private equity firm Yellowstone Capital Partners and Kensico itself, all of which would likely be displaced by a conversion that doesn’t appear to leave any office space behind.
None of the relevant players commented to the outlet about the application. Should the conversion take place, the hotel would be competing with the likes of Omni Berkshire Place, Lotte New York Palace and Hotel Elysee in the neighborhood.
New York City’s hotel market is outperforming the rest of the sector nationally in a number of key metrics, including average weekly occupancy rate — 82 percent in the first half of the year, according to CoStar — and revenue per available room in the city per night, which averaged $238.93 a week.
The city’s hotel owners are benefitting from a pair of critical legislative changes in recent years.
A 2021 City Council bill mandated a special permit for new hotel developments, essentially freezing the sector’s construction pipeline.
Two years ago, the city began cracking down on short-term rentals, blocking platforms from processing payments to hosts that were either unregistered with the city or didn’t have approval to rent their properties for fewer than 30 days.
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