Could Rezoning Put an End to the Fashion District?

In August, Mayor Eric Adams announced plans to rezone roughly 42 blocks in Midtown South from commercial to residential use, encouraging landlords to convert unused office space into roughly 3,000 apartments to ease the city’s housing shortage.

This would be the second rezoning of the Garment District in five years, a neighborhood located from West 35th to West 40th streets, between Broadway and Ninth Avenue. The first time, in 2018, the city relaxed rules requiring landlords to lease space to fashion businesses. The goal was to motivate landlords to invest in building upgrades and lure in more businesses to generate much needed commercial revenue to the district. Previously, landlords could not obtain building permits for major capital renovations due to noncompliance with zoning laws.

But the outcomes of the first rezoning weren’t enough to revitalize the neighborhood. Several fashion warehouses moved out as the pandemic shuttered business and a number of long-time factory owners retired and closed their facilities. Now, the latest rezoning effort is garnering a mixture of enthusiasm and dread, as small business owners worry about the sustainability of the fashion district.

The fashion industry was once among the most profitable in New York, according to a publication by the Garment District Alliance, a nonprofit that promotes business improvement in the neighborhood. But the past several decades have been a nonstop struggle with rising rents and competition from cheaper international factories.

The number of apparel manufacturing jobs in the district has shrunk from 25,000 in 1987, the year the Garment District was created, to less than 3,000 as of 2020, according to a report by the Garment District Alliance. But fashion businesses feel like this rezoning may be the end of the district entirely.

“That would be the final straw to totally decimate the industry,” said Mario Lipari, owner of Quality Patterns, a grading and marking business on West 38th Street. Lipari’s been in business for over 50 years but fears the rezoning proposal.

“Prepare ourselves to close the door if that happens,” he said.

Rent increases are a major concern, said Lipari, who worries that once current leases expire, landlords will convert their properties to more lucrative residential spaces.

Average asking office rents in the Garment District are $74 per square foot compared to above $80 for adjacent Times Square and Grand Central neighborhoods, according to real estate data platform Squarefoot.

“Anything that’s going to make rent more expensive here could be really, really detrimental,” said Alex Baas, the CEO and founder of District Leathers. “Rent is already very, very expensive and these are not Fortune 500 companies.”

But real estate experts see potential in the rezoning.

“With the advent of Hudson Yards, it’s suddenly made the Garment District in the middle of something versus on the end of something,” said Eric Gural, co-CEO of GFP Real Estate, a commercial real estate firm that owns more than 55 properties and 13 million square feet of office space in New York City.

The Garment District Alliance agrees. According to a residential study it published last October, the organization supports residential conversions to create a vibrant community.

“We eagerly await the Garment District’s transformation into a 24/7 neighborhood where people can work, visit, and live,” said Barbara Blair, president of the Garment District Alliance, in a press release. The Garment District Alliance did not respond to requests for comment.

But rezoning requires several layers of approval and some residents don’t feel the process is collaborative enough.

Zoning map amendments are subject to the Uniform Land Use Review Procedure, a public review process that involves recommendations from the local community board and borough president before the city council and mayor make their decision.

Lipari said he did not participate in the last public review process in 2018. “They never even notified anybody in the industry,” he said, adding that the hearings aren’t always transparent. “Is it going to be a public hearing or a private little club with a few real estate brokers that are going to get sweetheart deals?”

But some business owners aren’t convinced that changes are coming at all.

“In the last 20 years, we heard about rezoning all of the time, and they really didn’t do anything,” said Peter Wai Chan, a Fashion Institute of Technology professor and co-owner of a sample and production factory in the Garment District.

During the last rezoning, the city promised several initiatives to safeguard manufacturing businesses, through the creation of the New York City Industrial Development Agency Garment Center Program.

The program offered prospective property owners 15-year-leases exclusively for fashion manufacturing. The incentives included a minimum of 500,000 square feet of factory space at a maximum gross rent of $35 per square foot, as well as discretionary tax benefits.

But implementation was incomplete.

In its first year, the NYCIDA Board approved three buildings totaling 200,000 square feet of fashion manufacturing space, according to a New York City Economic Development Corporation announcement. They have closed one additional deal for an unspecified amount of square feet, said Adrien Lesser, the vice president of media relations for the NYC EDC, in an email.

With minimum wage set to increase to $16 in 2024, up 6.7%, according to the Department of Labor, manufacturers are concerned about any additional obstacles. Margins are already extremely thin, said Chan.

“New York City is considered one of the fashion cities,” said Chan, who believes the city has an obligation to preserve the industry by keeping sufficient space for factories. “Just give us a few buildings.”

Meanwhile, developers are eager about the changes coming to the Garment District.

“We have to continue to evolve. That’s what Darwin said. He didn’t just mean people. He meant cities too,” said Gural.