The First Sale in the New MSMX Zoning

Why is the sale of 1181 Broadway significant?

1181 Broadway, better known as the Baudouine Building, recently sold for $24 million, or approximately $875 per square foot. This represents the higher end of prices achieved for an office property in Midtown South, especially as much of the broader office market remains below $400/SF. The transaction underscores investor confidence in well-located, conversion-ready assets despite ongoing softness in the traditional Class B and C sectors.

Why is this building a strong candidate for residential conversion?

Located at the corner of West 28th Street and Broadway, the property benefits from exceptional light, air, and corner exposure, all key criteria for a successful office-to-residential conversion. The upper floors are particularly well-suited for residential use, while the lower levels retain strong appeal for retail or creative office tenants given proximity to Madison Square Park.

How does the new MSMX zoning affect redevelopment potential?

Under the Midtown South Mixed-Use (MSMX) zoning, any full residential conversion must comply with Mandatory Inclusionary Housing (MIH) requirements, mandating a share of permanently affordable housing. However, the zoning text provides a notable exception: projects with no more than 10 residential units and a total of up to 12,500 square feet of residential floor area are exempt from MIH.

What strategy is the new owner likely to pursue?

Given NoMad’s strong condominium market, where sellouts can exceed $1,800/SF, the buyer will likely pursue a hybrid strategy. Upper floors will be converted into a limited number of high-end condominium units while maintaining office and retail uses on the lower levels. This approach maximizes value while avoiding the time and cost associated with MIH compliance.

What does this mean for other property owners in the area?

The sale of the Baudouine Building illustrates how strategic, partial conversions can unlock significant value under the new MSMX framework. For owners of similarly positioned properties, understanding the nuances of the new zoning and MIH thresholds will be key to determining the highest and best use of their assets.