Adding Main Street vibe in Melville could shore up property tax base
Maxess Road in Melville, looking south. Credit: Newsday / Steve Pfost
Power-walkers may soon be a more common sight in Melville than those dressed for power lunch, as local leaders consider a plan that would add residences and retail to the quintessential corporate hub.
With more office space sitting empty, the Town of Huntington is exploring turning Maxess Road — a four-lane road surrounded by buildings with expansive parking lots — into a tree-lined, walkable town center. New multifamily housing above retail, restaurants or offices would complete the revamp.
Steering some commercial properties and parking lots into mixed-use developments could shore up the town's tax base and amp up the area's appeal to residents, town communications director Christine Geed said. Now, there are often more geese than people on the sidewalks along Maxess Road.
Waning demand for offices hasn't significantly cut into tax revenue, but may start to do so soon, according to Laureen Harris, an attorney who specializes in property tax proceedings. Owners of office buildings with significant vacancies can apply for property tax reductions, and if income from their rent falls, landlords can have the value of their properties reassessed with lower appraisals limiting their tax bills. Homeowners in those communities could see their taxes increase to make up the difference.
Town Supervisor Ed Smyth abandoned a proposal to rezone Melville for retail and multifamily buildings that was put forward by his predecessor and spent months soliciting input from residents and other stakeholders, Geed said. The feedback was funneled into a "consensus plan" that calls for a park, plaza, amphitheater or other public spaces near two basins now used for storm water management on Maxess Road, a 1.2-mile span between the South Service Road of the Long Island Expressway and Ruland Road.
The town is talking to property owners about what's financially viable. Then the Department of Planning and Environment will create more detailed plans that would be shared publicly — potentially near the end of the year — ahead of any formal proposal before the Town Board, according to Geed.
Seven firms that own property on and near Maxess Road said the revamp is a good idea, with many noting that it could address a shortage of rental housing that has hindered the Island's ability to attract businesses. A few described the vision as "ambitious."
Those who want to reposition their properties will have to game out whether to knock down structures and build anew, or reap environmental benefits and time savings through a retrofit. Creating a Main Street culture will also require extensive changes to the streets and sidewalks, according to planning experts.
"It has its challenges to getting it done, but if they can pull it off, it certainly will be great for Melville and for Long Island," said Adam Levine, partner at Melville Industrial Associates, which owns about 580,000 square feet of office space in Melville.
"The time has come" for the long-discussed Melville redevelopment plan, said Harris, senior attorney at Cronin Harris & Associates, P.C. in Uniondale. “Let’s repurpose, so an increased potential loss of revenue from real estate taxes doesn’t shift on to the rest of the community,” she added.
Challenges in the western Suffolk office market will likely deepen as the area more fully absorbs changes in how we work brought on by the pandemic, commercial real estate experts said. The region's vacancy rate hit 10.8% at the end of the last quarter, up from 7% at that point in 2019, according to the real estate analytics firm CoStar Group. But a dramatic increase in "ghost space" — areas that are available for sublet or otherwise rented, but unoccupied — suggests many businesses will seek out smaller footprints when their leases expire, said Tony Fromer, principal at We’re Associates Inc., a commercial real estate firm. (Newsday leases from We’re Associates.)
Many office leases span five or 10 years, so several seasons may pass before leasing data reflects demand, Harris said. She said she'd seen rent rates decline in recent deals. Over time, decreases could diminish the value of office buildings, and consequently, the taxes they pay.
That hasn't happened yet, she said. From 2020 to 2023, Huntington granted three tax reductions because offices in Melville had significant vacancies — a move that typically acknowledges that at least a quarter of the property is empty, according to data gathered through a Freedom of Information Law Request. In one case, the owner — Fairfield Properties — received a $59,000 reduction because the building, 175 Pinelawn Rd., was in poor shape when Fairfield purchased it at a foreclosure auction, the company said. Owners of the other two properties — Huntington Quadrangle 3, which was granted a $75,000 reduction in 2021, and 25 Melville Park Rd., which received a $12,000 reduction in 2023 — didn’t respond to requests for comment.
Market rents seem to be on a more sustained downward path once inflation is factored in. In western Suffolk, the market rent for office space hit $30.27 per square foot on an annual basis last quarter, down from $32.58 in 2013 and $39.35 two decades ago, according to CoStar data adjusted for inflation.
"Relative to inflation, you’ve lost from an investment standpoint,” said Greg DeRosa, CEO of G2D Group, a Huntington-based construction, property management and development firm. “As these buildings get older and just naturally become less desirable, if there’s less demand, it’s going to be a pretty bad situation from a tax [perspective].”
Still, the downswing may not be severe enough to automatically usher in widespread redevelopment in Melville, where the office market tends to experience less intense highs and lows than other parts of the metro area.
Some landlords said they were pleased with their offices' performance and didn't envision changing them. In fact, Fairfield Properties is so optimistic about its Melville office portfolio that it hopes to expand 538 Broadhollow Rd. The company wants to accomplish a long-held goal of adding a floor to that office building while the town may be open to relaxing parking requirements and building height limits, according to comanaging partners Gary and Michael Broxmeyer.
Although We're Associates floated transforming part of the Huntington Quadrangle into housing in 2015, the firm has since invested money into its portion of the development, and is no longer focused on that idea, Fromer said.
Nationwide, the number of offices transitioning to multifamily rental properties has grown, according to research put out in late 2022 by the real estate services firm CBRE. From 2017 to 2022, an average of 14 such retrofits were done each year, whereas 34 were expected to be finished in 2023, according to Jessica Morin, director of U.S. office research at CBRE.
Apartments are generally more in-demand, but office properties have historically been more valuable, and in many cases, their prices haven’t dropped enough to justify the cost of conversion.
Financial assessments vary widely based on the region and the specific property’s age, shape and infrastructure, but the cost of conversion may range from $100 to more than $500 a square foot in the U.S., according to CBRE research. That’s a large investment considering the potential profit margins for both types of buildings are fairly similar. In 2022, apartment buildings had an average net operating income of $16 per square foot annually, compared to $15.50 in offices, CBRE noted.
Market rents for apartments in western Suffolk — $34.86 per square foot on an annual basis, as of last quarter — recently eclipsed prices for offices there — $29.96 per square foot on an annual basis, according to CoStar.
How much construction will be allowed on parking lots in Melville is not yet known. But a few regional developers have already expressed interest in redeveloping office buildings in the area. Melville Industrial Associates may want to replace 10 Melville Park Rd. because it’s occupied by a single tenant, Marcum L.P., that’s expected to vacate in a few years, according to Levine. G2D Group would like to redevelop 560 Broadhollow Rd., which is 70% vacant, DeRosa said. The firm has been kicking around ideas, including adding 120 rental units above ground-floor retail and office space.
A need for more apartments has been at the forefront of conversations about conversion projects across the country. In Huntington, however, town officials believe the community prefers condos over rented apartments, Geed said. Regional developers said condos are a less attractive opportunity, and Geed acknowledged that the town could end up with a mixture of for-sale and rented units.
Conversions involving condo development haven’t been as widely studied and would be riskier, according to Jerrod Delaine, a developer and visiting assistant professor at Pratt Institute's School of Architecture. Securing financing for condos would be more challenging than for apartments, particularly in the current economic environment, Delaine said. He noted that selling homes can be tougher in downturns, whereas apartment prices can always be temporarily lowered to fill units.
“Condos are very high stakes. You put in a lot of money,” Delaine said. “You need to sell at X price to get out of there successfully, and you will hold onto that building until you get that price.”
Besides considering what type of housing to build, developers would decide what construction strategy to use: leveling offices and starting over or retrofitting the structures. Property owners told Newsday they’d probably prefer to tear down offices than tinker with footprints that weren't developed with housing in mind.
“There’s less gray area about what’s in the building, what could go wrong,” Delaine said. “If you start doing renovations, you might find issues that you didn’t see before and weren’t in your original budget.”
Retrofitting rarely results in significant cost savings, according to June Williamson, director of master of architecture and MS architecture programs at The City College of New York. But repurposing older buildings could expedite the time it takes to deliver housing and curb the environmental impact of projects, she said.
“There is a lot of what we call embodied energy in things that have already been constructed: in the concrete, in the steel,” said Williamson, who has written books about retrofitting suburban properties. “You probably would need to put a new facade on the building or substantially change it in some ways … but the primary structure would be retained, and that’s a net positive for the environment.”
Melville’s office stock tends to have large, open floors, where light and air from the windows doesn’t reach the core. Developers could choose to repurpose those areas as gyms, office spaces or other shared amenities — or take other steps to ensure all residences have sufficient natural light, Williamson said. Crews could make a courtyard in the center of the structure, carve out balconies around the exterior or build bay windows that push in, rather than out, she said.
Heating, ventilation and air conditioning systems will need to be reconfigured so individual residents can control the climate, Williamson said.
Many kitchens and bathrooms will need to be stacked on top of one another, though crews won’t necessarily need to demolish the floor between them. They could cut holes from the roof to the floor and thread pipes through them, Williamson said.
Quick fixes will not be sufficient when it comes to cultivating an inviting town center, Williamson said. Buildings isolated in huge parking lots along a few curving drives aren't the most inviting atmosphere for walking or spending time in parks, Williamson said. Creating more of a street grid could help by slowing and diffusing car traffic, she said. Narrower lanes for drivers and wider sidewalks would also be smart, she said.
As developers embark on projects, the parking lots could be broken up with landscaping, pathways, gardens, pools, lounges, barbecue areas and other communal spaces, said Williamson and Delaine.
The town will need to play a central role in coordinating a central vision because, unlike most master plans with one or two large land owners, several owners and developers have a stake in Melville, Levine said. Timing will also be paramount, he said.
“The town should move expeditiously toward allowing multifamily development,” he said. “If they want developers to spend money to build public spaces and retail, you need to have a customer base.”
Power-walkers may soon be a more common sight in Melville than those dressed for power lunch, as local leaders consider a plan that would add residences and retail to the quintessential corporate hub.
With more office space sitting empty, the Town of Huntington is exploring turning Maxess Road — a four-lane road surrounded by buildings with expansive parking lots — into a tree-lined, walkable town center. New multifamily housing above retail, restaurants or offices would complete the revamp.
Steering some commercial properties and parking lots into mixed-use developments could shore up the town's tax base and amp up the area's appeal to residents, town communications director Christine Geed said. Now, there are often more geese than people on the sidewalks along Maxess Road.
Waning demand for offices hasn't significantly cut into tax revenue, but may start to do so soon, according to Laureen Harris, an attorney who specializes in property tax proceedings. Owners of office buildings with significant vacancies can apply for property tax reductions, and if income from their rent falls, landlords can have the value of their properties reassessed with lower appraisals limiting their tax bills. Homeowners in those communities could see their taxes increase to make up the difference.
WHAT TO KNOW:
- Melville offices have more vacancies, and eventually, less demand could impact property taxes.
- Creating a town center along Maxess Road is being explored as a way to revive the area and shore up tax revenue.
- Multifamily housing and retail could be introduced as part of this approach.
- A formal plan may be presented by the town near the end of the year.
Town Supervisor Ed Smyth abandoned a proposal to rezone Melville for retail and multifamily buildings that was put forward by his predecessor and spent months soliciting input from residents and other stakeholders, Geed said. The feedback was funneled into a "consensus plan" that calls for a park, plaza, amphitheater or other public spaces near two basins now used for storm water management on Maxess Road, a 1.2-mile span between the South Service Road of the Long Island Expressway and Ruland Road.
The town is talking to property owners about what's financially viable. Then the Department of Planning and Environment will create more detailed plans that would be shared publicly — potentially near the end of the year — ahead of any formal proposal before the Town Board, according to Geed.
Seven firms that own property on and near Maxess Road said the revamp is a good idea, with many noting that it could address a shortage of rental housing that has hindered the Island's ability to attract businesses. A few described the vision as "ambitious."
Those who want to reposition their properties will have to game out whether to knock down structures and build anew, or reap environmental benefits and time savings through a retrofit. Creating a Main Street culture will also require extensive changes to the streets and sidewalks, according to planning experts.
It has its challenges to getting it done, but if they can pull it off, it certainly will be great for Melville and for Long Island.
—Adam Levine, partner at Melville Industrial Associates
Credit: Newsday / Steve Pfost
"It has its challenges to getting it done, but if they can pull it off, it certainly will be great for Melville and for Long Island," said Adam Levine, partner at Melville Industrial Associates, which owns about 580,000 square feet of office space in Melville.
The time has come ... let’s repurpose, so an increased potential loss of revenue from real estate taxes doesn’t shift on to the rest of the community.
—Laureen Harris, attorney who specializes in property tax proceedings
Credit: Rick Kopstein
"The time has come" for the long-discussed Melville redevelopment plan, said Harris, senior attorney at Cronin Harris & Associates, P.C. in Uniondale. “Let’s repurpose, so an increased potential loss of revenue from real estate taxes doesn’t shift on to the rest of the community,” she added.
Office vacancy rates up
Challenges in the western Suffolk office market will likely deepen as the area more fully absorbs changes in how we work brought on by the pandemic, commercial real estate experts said. The region's vacancy rate hit 10.8% at the end of the last quarter, up from 7% at that point in 2019, according to the real estate analytics firm CoStar Group. But a dramatic increase in "ghost space" — areas that are available for sublet or otherwise rented, but unoccupied — suggests many businesses will seek out smaller footprints when their leases expire, said Tony Fromer, principal at We’re Associates Inc., a commercial real estate firm. (Newsday leases from We’re Associates.)
Many office leases span five or 10 years, so several seasons may pass before leasing data reflects demand, Harris said. She said she'd seen rent rates decline in recent deals. Over time, decreases could diminish the value of office buildings, and consequently, the taxes they pay.
That hasn't happened yet, she said. From 2020 to 2023, Huntington granted three tax reductions because offices in Melville had significant vacancies — a move that typically acknowledges that at least a quarter of the property is empty, according to data gathered through a Freedom of Information Law Request. In one case, the owner — Fairfield Properties — received a $59,000 reduction because the building, 175 Pinelawn Rd., was in poor shape when Fairfield purchased it at a foreclosure auction, the company said. Owners of the other two properties — Huntington Quadrangle 3, which was granted a $75,000 reduction in 2021, and 25 Melville Park Rd., which received a $12,000 reduction in 2023 — didn’t respond to requests for comment.
Market rents seem to be on a more sustained downward path once inflation is factored in. In western Suffolk, the market rent for office space hit $30.27 per square foot on an annual basis last quarter, down from $32.58 in 2013 and $39.35 two decades ago, according to CoStar data adjusted for inflation.
As these buildings get older and just naturally become less desirable, if there’s less demand, it’s going to be a pretty bad situation from a tax [perspective].
—Greg DeRosa, CEO of G2D Group, a construction, property management and development firm
Credit: James Carbone
"Relative to inflation, you’ve lost from an investment standpoint,” said Greg DeRosa, CEO of G2D Group, a Huntington-based construction, property management and development firm. “As these buildings get older and just naturally become less desirable, if there’s less demand, it’s going to be a pretty bad situation from a tax [perspective].”
Apartment rents pass office rents
Still, the downswing may not be severe enough to automatically usher in widespread redevelopment in Melville, where the office market tends to experience less intense highs and lows than other parts of the metro area.
Some landlords said they were pleased with their offices' performance and didn't envision changing them. In fact, Fairfield Properties is so optimistic about its Melville office portfolio that it hopes to expand 538 Broadhollow Rd. The company wants to accomplish a long-held goal of adding a floor to that office building while the town may be open to relaxing parking requirements and building height limits, according to comanaging partners Gary and Michael Broxmeyer.
Although We're Associates floated transforming part of the Huntington Quadrangle into housing in 2015, the firm has since invested money into its portion of the development, and is no longer focused on that idea, Fromer said.
Nationwide, the number of offices transitioning to multifamily rental properties has grown, according to research put out in late 2022 by the real estate services firm CBRE. From 2017 to 2022, an average of 14 such retrofits were done each year, whereas 34 were expected to be finished in 2023, according to Jessica Morin, director of U.S. office research at CBRE.
Apartments are generally more in-demand, but office properties have historically been more valuable, and in many cases, their prices haven’t dropped enough to justify the cost of conversion.
Financial assessments vary widely based on the region and the specific property’s age, shape and infrastructure, but the cost of conversion may range from $100 to more than $500 a square foot in the U.S., according to CBRE research. That’s a large investment considering the potential profit margins for both types of buildings are fairly similar. In 2022, apartment buildings had an average net operating income of $16 per square foot annually, compared to $15.50 in offices, CBRE noted.
Market rents for apartments in western Suffolk — $34.86 per square foot on an annual basis, as of last quarter — recently eclipsed prices for offices there — $29.96 per square foot on an annual basis, according to CoStar.
How much construction will be allowed on parking lots in Melville is not yet known. But a few regional developers have already expressed interest in redeveloping office buildings in the area. Melville Industrial Associates may want to replace 10 Melville Park Rd. because it’s occupied by a single tenant, Marcum L.P., that’s expected to vacate in a few years, according to Levine. G2D Group would like to redevelop 560 Broadhollow Rd., which is 70% vacant, DeRosa said. The firm has been kicking around ideas, including adding 120 rental units above ground-floor retail and office space.
Condos vs. apartments
A need for more apartments has been at the forefront of conversations about conversion projects across the country. In Huntington, however, town officials believe the community prefers condos over rented apartments, Geed said. Regional developers said condos are a less attractive opportunity, and Geed acknowledged that the town could end up with a mixture of for-sale and rented units.
Conversions involving condo development haven’t been as widely studied and would be riskier, according to Jerrod Delaine, a developer and visiting assistant professor at Pratt Institute's School of Architecture. Securing financing for condos would be more challenging than for apartments, particularly in the current economic environment, Delaine said. He noted that selling homes can be tougher in downturns, whereas apartment prices can always be temporarily lowered to fill units.
“Condos are very high stakes. You put in a lot of money,” Delaine said. “You need to sell at X price to get out of there successfully, and you will hold onto that building until you get that price.”
New construction vs. conversion
Besides considering what type of housing to build, developers would decide what construction strategy to use: leveling offices and starting over or retrofitting the structures. Property owners told Newsday they’d probably prefer to tear down offices than tinker with footprints that weren't developed with housing in mind.
“There’s less gray area about what’s in the building, what could go wrong,” Delaine said. “If you start doing renovations, you might find issues that you didn’t see before and weren’t in your original budget.”
Retrofitting rarely results in significant cost savings, according to June Williamson, director of master of architecture and MS architecture programs at The City College of New York. But repurposing older buildings could expedite the time it takes to deliver housing and curb the environmental impact of projects, she said.
“There is a lot of what we call embodied energy in things that have already been constructed: in the concrete, in the steel,” said Williamson, who has written books about retrofitting suburban properties. “You probably would need to put a new facade on the building or substantially change it in some ways … but the primary structure would be retained, and that’s a net positive for the environment.”
Melville’s office stock tends to have large, open floors, where light and air from the windows doesn’t reach the core. Developers could choose to repurpose those areas as gyms, office spaces or other shared amenities — or take other steps to ensure all residences have sufficient natural light, Williamson said. Crews could make a courtyard in the center of the structure, carve out balconies around the exterior or build bay windows that push in, rather than out, she said.
Heating, ventilation and air conditioning systems will need to be reconfigured so individual residents can control the climate, Williamson said.
Many kitchens and bathrooms will need to be stacked on top of one another, though crews won’t necessarily need to demolish the floor between them. They could cut holes from the roof to the floor and thread pipes through them, Williamson said.
Streetscape changes needed
Quick fixes will not be sufficient when it comes to cultivating an inviting town center, Williamson said. Buildings isolated in huge parking lots along a few curving drives aren't the most inviting atmosphere for walking or spending time in parks, Williamson said. Creating more of a street grid could help by slowing and diffusing car traffic, she said. Narrower lanes for drivers and wider sidewalks would also be smart, she said.
As developers embark on projects, the parking lots could be broken up with landscaping, pathways, gardens, pools, lounges, barbecue areas and other communal spaces, said Williamson and Delaine.
The town will need to play a central role in coordinating a central vision because, unlike most master plans with one or two large land owners, several owners and developers have a stake in Melville, Levine said. Timing will also be paramount, he said.
“The town should move expeditiously toward allowing multifamily development,” he said. “If they want developers to spend money to build public spaces and retail, you need to have a customer base.”
Sarina Trangle covers affordability and cost of living issues and other business topics. She previously worked as an editor and reporter at amNewYork.
Finding low-key vibes in Miami ... HS field hockey player beats cancer ... Get the latest news and more great videos at NewsdayTV
Finding low-key vibes in Miami ... HS field hockey player beats cancer ... Get the latest news and more great videos at NewsdayTV
