Marty Burger bet $107 million on a rezoning that had not yet passed. The former Silverstein Properties CEO, alongside Andrew Heiberger, put 29 West 35th Street under contract in mid-2024, wagering the City Council would approve the Midtown South rezoning. It did, last August. The sale closed in October. The building, a 12-story office relic next to an Irish pub, is now slated for a 107-unit apartment conversion with a rooftop movie screen.
That single project accounts for 1 percent of the rezoning's stated goal: 10,000 new housing units across 42 blocks between Fifth and Ninth Avenues, from West 34th to 42nd Streets. Nine months after passage, no other ground-up or conversion project has broken ground. Brokers report daily inquiries from landlords of aging office stock, but signed contracts remain scarce. The pipeline is a trickle, not a wave.
The bottleneck is arithmetic. New York's 485x tax incentive program, which developers rely on to make multifamily projects viable, imposes prevailing wage requirements on projects with more than 100 units. Burger's 107-unit building triggers that threshold. The wage floor cuts deeply into projected margins. Michael Cohen of Williams Equities, which owns office buildings in the district, put it bluntly: the rezoning's impact is "hampered by the prevailing wage requirement of 485x."
Burger's project pencils only because of a separate tax break: 467m, the office-to-residential conversion incentive. "You wouldn't be able to build this without 467m," Burger said. "The numbers just wouldn't work." That is a fragile foundation for a policy meant to catalyze a neighborhood-wide transformation. One tax credit offsets another, and the margin left over is thin enough that any cost overrun or delay could flip the pro forma from green to red.
The rezoning itself was a decade in the making. In 1987, the city mandated that Garment District landlords preserve space for apparel manufacturers, a futile attempt to halt globalization's erosion of the sector. Mayor Bill de Blasio lifted some restrictions in 2018 but left the housing ban intact. Mayor Eric Adams' City of Yes legislation finally cleared the way in 2024. The policy victory, however, collided with a construction cost environment that has not cooperated.
Existing tenants compound the problem. Many buildings in the district are still occupied by garment and fashion tenants on long-term leases. Developers must wait for those leases to expire or negotiate buyouts, adding time and cost to any conversion timeline. The rezoning does not extinguish existing tenancies. It only changes what can be built once the space is vacant.
The market context is unforgiving. Construction financing for office-to-residential conversions remains expensive and selective. Lenders are underwriting to stressed debt yields and requiring significant sponsor equity. The days of cheap debt that funded speculative redevelopments are over. Every project must survive a gauntlet of wage requirements, tenant holdouts, and construction cost inflation that was not present when the rezoning was conceived.
Burger's project at 29 West 35th Street will likely get built. He has the track record, the capital, and the tax incentives aligned. But one project does not make a neighborhood transformation. The rezoning's success will be measured not by the units approved but by the units delivered. On that metric, nine months in, the score is 107 out of 10,000.
The broader lesson for capital markets is cautionary. Zoning reform is necessary but not sufficient for housing production. Without addressing the cost structure—prevailing wage mandates, construction costs, tenant relocation—even the most ambitious upzoning will produce a trickle, not a wave. Investors underwriting multifamily in newly rezoned areas should model for margin compression, not margin expansion. The math has not changed. The zoning has.