Two Strategies for Nonprofits to Reduce Occupancy Costs 

Nonprofit organizations are in a unique position to execute on the strategies noted below to effectively reduce their leasing costs by an amount corresponding to the real estate tax cost that is implicit in their cost of leasing.

30-Year Leasehold Condominium

In NYC, if a non-residential property is leased for a minimum term of 30 years, the landlord is permitted to convert the leased space into a condominium and can give ownership of the leased space to the nonprofit organization for the duration of the lease. The newly created leasehold condominium then becomes a separate tax lot with the consequence that the nonprofit owner is not subject to real estate taxes on the property.
In simple terms, if the real estate taxes for the property prior to condominium conversion were $10 psf., then following the conversion rent of $50 psf. effectively becomes $40 psf., with no annual real estate tax passthrough that would increase the rent.
➡️ For more details on how 30-year leasehold condominiums work, explore The 30-Year Leasehold Condo NYC: What You Need to Know.
This strategy allows nonprofit organizations to take advantage of the laws of ownership without having to divert capital to a downpayment and renovation. Landlords throughout Manhattan and the Boroughs have become increasingly aware and accommodating of this strategy.
➡️ For examples of nonprofits successfully leveraging this strategy, check out The Rise of Nonprofits in New York City’s Office Leasing Market.

Ownership

An Office Condominium

The office condominium market makes up approximately 2%-3% of the commercial office market in Manhattan, with over 100 buildings that offer office condos for sale. Pre-COVID, the average price of office condominiums was between $800 – $1,000 psf., but the market has dropped considerably with the result that many transactions are now getting done at below $500 psf.
➡️ To understand how nonprofits can benefit from owning office condos, read Benefits of Condo Ownership.

A Commercial Building

In 2023, investment sales dropped 45% from 2022. This depressed sales market presents the opportunity to own property at pricing levels that may not be this low again, and as a nonprofit, the real estate tax is eliminated from occupancy costs as noted above.
➡️ For insights into how nonprofits can benefit from current market conditions, explore Why Nonprofits Are Taking More New York Office Space.

I would be delighted to discuss available options and provide a financial analysis of a 30-year deal scenario.

Paul Walker

Senior Vice President 

Paul.walker@cbre.com

212-984-7117