It is not often that bureaucratic procedures and high fashion collide, but the Fashion Center is changing and the BID is faced with the task of finding a delicate balance between real estate and industry. For a brief overview of fashion production in the District and the potential implications of changes afoot, you can read the article, “New York Seeks to Consolidate its Garment District,” published in August 2009 in the New York Times.
Current zoning regulations preserve a significant amount of manufacturing space in the District, and much of this space has remained underutilized or completely vacant for years as the majority of production has moved overseas. The neighborhood would dramatically improve if this unused space could be put to its highest and best use but the release of the manufacturing zoning restrictions must be accompanied by a plan or mechanism to protect the vibrant fashion industry that populates the area and makes the City thrive. There are several such options on the table.
The Fashion Center BID seeks a plan that will achieve two key objectives:
1. Protect and strengthen the fashion industry in the City and the region by preserving a sufficient amount of apparel production space in a concentrated geographic core, and
2. Lift the restrictive manufacturing zoning in the Fashion District thereby creating several million square feet of much-needed class B & C office space in the midtown Manhattan office core.
The BID has been working with the Bloomberg Administration, including the Economic Development Corporation and City Planning, for almost two years to change the Special Garment District Zoning. The Fashion Center BID advocates change because the economic and industry premises that led to the current zoning are no longer relevant. The zoning has not achieved its goal of saving manufacturing and ensuring that the apparel design community continues to have a home here. Furthermore, the zoning has only suppressed property values, which has discouraged investment in the District.
Current Proposals for Zoning Change
Over the last few years, several different mechanisms for a zoning change have been discussed. The structures of the proposals have varied but the principles and goals remain the same:
- Lift the restrictions of the SGCD zoning
- Preserve adequate manufacturing space to support the industry’s needs
- Create a plan in which all affected parties (property owners, the fashion industry, and the City) share the benefits and costs.
- Develop programming to market and promote fashion industry designers, showrooms and suppliers.
One such proposal involves designating a particular building, or buildings, for manufacturing in exchange for the rest of the district being released from the restrictions of the SGCD zoning. The goal is to identify and lease some 300,000 to 500,000 square feet of space to be sublet to apparel manufacturers. The building(s) would be managed by a non-profit organization which would have funding available to underwrite the building management, maintenance and improvements and to keep rents at a reasonably low cost. Under this proposed scenario, the funding would be raised by issuing a bond. The costs of this bond would be secured and funded through an additional BID assessment applied to all BID properties, regardless of whether the which would be y are located within the P1 and P2 preservation areas. The assessment would be proportional and based on each individual property’s assessed value. The amount of the assessment would depend on the amount of the bond, the interest rate, the number of years, closing costs and other variables. This is not the only proposal which is being discussed but, at the present time, it seems the most viable.
The BID has held three discussion sessions inviting owners to help us craft a plan, or respond to the plan described above. At these sessions, we explained what this plan would entail and how it would impact individual properties. We plan to schedule tenant meetings to get feed back from the tenants as well. Notification of meetings is through mailings and email communications. Anyone who has not attended a meeting but wishes to learn more about this plan should contact the BID by calling 212.764.9600.
Zoning Background
The background information provided in the following synopsis was prepared by the Fashion Center BID in the Spring of 2009 to help put the zoning issues in context and to help owners and tenants understand the process that has led to the creation of the current proposal.
Several different sets of zoning regulations dictate building usage; that is, the types of tenants to whom owners may rent in the Fashion District. Zoning regulations vary from avenue to side street, and from block to block, with numerous exclusions and exceptions. This mix of underlying and overlaying regulations can often lead to confusion and the potential for building department fines for both property owners and businesses.
In general, the portion of the district situated east of Broadway is zoned for high-density commercial, a designation that allows a range of as-of-right uses, including light manufacturing and commercial office. Residential is permitted on the Sixth Avenue. Most of the district west of Broadway, however, is included in the Special Garment Center District (SGCD), a special zoning area designated by the City Planning Commission, which provides unique restrictions on side street buildings within its boundaries.
Although the borders are somewhat irregular, the Special Garment District Overlay generally affects side street buildings west of Broadway, between 35th Street and 40th Street. Side street properties within this area are designated a manufacturing “preservation area,” which restricts the conversion of manufacturing space to office or other non-manufacturing uses including residential.
Within the preservation areas, space in side street buildings is designated for production usage. If a property owner wishes to convert space to commercial usage, he or she may do so only with the approval of City Planning, and the property owner must preserve an equal amount of space for apparel production in another location.
It should be noted that the primary intention of the preservation restrictions was to preserve garment manufacturing; that is, actual garment production. But other apparel industry tenants such as warehouses and showrooms have been considered allowable under the manufacturing conversion provisions.
Special Garment Center District History
The SGCD zoning was enacted in 1987 after UNITE approached then-Mayor Edward Koch, requesting that the City establish a special zoning district in the Fashion District. The goal was to use land use restrictions to preserve affordable manufacturing space in an effort to stem the tide of the outflow of manufacturing jobs overseas. The request for the Special Garment Center District was also in response to the recent rezoning of Times Square, which had sparked the concern that the ripple effect of the anticipated development in Times Square would displace the industry even further. City Planning believed that restrictions on the district would protect production jobs and allay the fear that manufacturing would be squeezed out as spaces were converted to office uses.
In 2005 the Far West Side of Manhattan was rezoned to allow for mixed-use development. Eighth Avenue to Ninth Avenue, from 35th,Street to 40th Street (designated as P2), was included in this “Hudson Yards” rezoning. In that area, the preservation restrictions were relaxed to include new residential and commercial uses that are now allowed on vacant or underused sites, or in buildings that were 70,000 sq. ft. or under. The impact of this rezoning has been profound, as it has sparked an explosion of hotel development in that area.
Several years ago the owners of properties in the BID approached the City requesting a zoning change to release them from their production obligations because it hampered their ability to attract tenants and discouraged investment in the area and in their buildings. The request demonstrated that the preserved space vastly exceeded the demand for actual production use.
In 2007 Amanda Burden, Commissioner of New York City Planning, agreed that something had to be done about the Fashion District. The city acknowledged that the preservation of space had not prevented production jobs from moving overseas.
Results of the SGCD Zoning
The total area of the fashion district represents 35.4 million square feet of space.
Currently 9.8 million sq. ft. of space is being preserved for manufacturing uses in the SGCD. However, the Economic Development Corporation, the NYC Department of City Planning, GIDC and the Fashion Center BID conducted a survey in 2006 and determined that there was only approximately 800,000 sq. ft. of production use remaining in the SGCD.
New York State employment numbers indicate that job losses in production declined at the same rate before the SGCD zoning was enacted as they did after it was in place.
Furthermore, over the decades since the SGCD overlay was enacted, as production uses declined, property owners in the Fashion District opted to rent to other business uses rather than have empty spaces in their buildings. These uses were generally small businesses, many of them in creative services, non-profits, arts uses or business services. However, this created a problem for owners because these uses were illegal according to the zoning.
If the SGCD zoning were actually enforced, there is a potential for exorbitantly high vacancy rates in the district.
The Future of Zoning & the Role
of the BID
As the zoning was ineffective in achieving its goal of retaining production uses in the district, the Fashion Center BID believes the stakeholders (the design community, the manufacturers and factory owners, the city and the property owners) must come together to identify more meaningful strategies that would better ensure the sustainability of production in the district without placing an onerous burden on property owners.
We strongly believe that the owners should have the opportunity to legitimize uses in their buildings. The need for Class B & C office space in New York is urgent. Almost 100% of new development in the last 20 years in New York has been Class A office space, while at the same time, over 80% of the businesses in New York are small businesses, often not able to pay for Class A office space. The space that is being preserved in the Fashion District could provide space that is desperately needed in the mix of commercial real estate in New York.
At the same time, the remaining production uses should be supported so that they may remain in the district, as they are a vital component of the fashion industry and part of the district’s identity. Toward that end, the Fashion Center BID is currently working with the City to create a plan to modify the amount of space preserved for production to more accurately reflect current need, while ensuring that the remaining manufacturing is protected.
Goals for a Rezoning
As we consider opportunities for amending the zoning, we are mindful of the following important goals, criteria and questions:
1. Release protected space that is not currently needed to meet the production needs of the design community.
2. Reach consensus with all district stakeholders about how to define and maintain an appropriate amount of production space necessary for the sustainability of the local industry.
3. Develop ways to encourage local apparel production, especially by local designers. Long-term sustainability will come from a market demand for the product, not by keeping rents artificially low through rent subsidies.
4. If a zoning change plan requires subsidized rents for a period of time, what parties should contribute and at what level? And if such subsidies are available, who will be eligible, at what level, and under what criteria?
5. In the midst of a proposed zoning change, it is important to maintain the district as the home of New York’s fashion industry. Need to develop non-legislative programs to ensure that the design community remains in the district as well as the showrooms, suppliers and other business elements of the fashion industry.
The Fashion Center BID feels it is important to continue the dialogue on this issue and work with the City administration, City Council and relevant district stakeholders to develop a meaningful alternative to the current overly restrictive zoning situation.
Zoning Proposals
Over the last two years, the FCBID has been involved in ongoing discussions regarding several different proposed scenarios for a zoning change.
In May 2008, the New York Economic Development Corporation presented owners of properties in the BID with a proposal, wherein certain buildings in the district that still had a critical mass of production would be designated as buildings that would remain production. However, this designation, or encumbrance, would drastically reduce the value of the affected real estate. To offset that reduction in value, it was proposed that owners who wanted to be released from their production encumbrances could buy credits from buildings that remained production, thus creating an additional revenue flow for the owners who continue to preserve manufacturing space and allowing owners who buy credits to legitimize non-production uses in their buildings.
A major difficulty of this plan is that it would be wholly dependent on vigorous and sustained enforcement by the Department of Buildings. Without enforcement there would be no motivation for owners to purchase credits in order to rent to nonconforming uses. The status of this particular proposal is uncertain.
Another proposal suggests that the zoning restrictions be lifted but that buildings which have already agreed to preserve their buildings for manufacturing use (in earlier years), and accepted ICIP tax benefits for doing so, must maintain that commitment despite any zoning change. Once an owner has accepted ICIP tax credits, he/she has agreed to preserve production. There are a number of such buildings in this district. But, some see a basic inequity in this plan: Why should these owners be penalized for keeping within the law and maintaining production in their buildings over the years, while others have illegally rented to commercial uses, reaped the benefits of those tenants for years, and would now be released from the zoning? For this plan to succeed, it would need to somehow create value for the ICIP owners.
As previously described on this site, the most recent proposal involves designating a particular building, or buildings, for manufacturing in exchange for the rest of the district being released from the restrictions of the SGCD zoning. The goal is to identify and lease some 300,000 to 500,000 square feet of space to be sublet to apparel manufacturers. The building(s) would be managed by a non-profit organization which would have funding available to underwrite the building management, maintenance and improvements and to keep rents reasonably low. Under this scenario, funding would be raised by issuing a bond. The costs of this bond would be secured and funded through an additional BID assessment which would be applied to all BID properties, regardless of whether they are located within the P1 and P2 preservation areas. The assessment would be proportional and based on each individual property’s assessed value. The amount of the assessment would depend on the amount of the bond, the interest rate, the number of years, closing costs and other variables.
Discussions regarding any possible zoning change continue and, as they do, new ideas are brought to the fore. For example, very recently, there has been some talk about incorporating tax credits into one of these proposals as a way to offset the costs of the designated manufacturing buildings. This concept, like all others, will be discussed during the ongoing outreach process as we work with the City and other interested parties to develop a rational and equitable plan for change.
We Want to Hear from You!
Before any plan can be enacted, there would, of course, be a public review process. But the Fashion Center BID has been actively seeking the input of its members (tenants and owners) at this stage in the process so that a plan might be constructed that makes sense for all the stakeholders.
Questions and suggestions regarding any of the proposed zoning changes may be addressed to the Fashion Center by emailing info@fashioncenter.com or by calling us at 212.764.9600
General questions about the current zoning, as well as specific questions about a particular building, block or lot should be directed to the Zoning Helpline at the NYC Department of City Planning by calling 212.720.3291.
To view the current Garment District zoning regulations, please refer to the Special Garment Center District Zoning text located in Article XII: Chapter 1 of the Department of City Planning Zoning Resolution.