The former Chelsea Fiber Mills rope factory stands at the end of Manhattan Avenue at the northern edge of Brooklyn, across the Newtown Creek from Queens. Despite a storied history, supplying rope for World War I and II, then a second life in garment and textile industries, the property was taken over by the city in 1974 in a tax foreclosure. Cash strapped, the city let the building fall into disrepair. In the 1980s, it tried to market the building to developers for residential redevelopment, but nobody wanted it.
By the early 1990s, a smattering of small businesses, nonprofits and artists were renting space in the decrepit building, but the city was considering tearing down the structure. So the renters formed a nonprofit, the Greenpoint Manufacturing & Design Center (GMDC), and acquired the property in 1994. They leveraged public and private dollars to bring the facility back into good repair and full use as a light manufacturing and artist hub. The group has since replicated the model in six more industrial buildings.
“It was much easier back then and into early 2000s,” says Brian Coleman, GMDC CEO. “That changed dramatically around mid-2006 or 2007. Property prices doubled. The old combination didn’t work anymore.”
The developers who once rejected big industrial properties like Chelsea Fiber Mills had started competing with the nonprofit. In 2008, the Pratt Center for Community Development, an NYC research group that focuses on the manufacturing sector, looked at all 95 rezonings in the city from 2003 to 2008, and found that one-quarter of them converted industrial zones to residential, commercial or mixed use. Between those and other planned rezonings at the time, the Pratt Center estimated NYC would have lost 20 percent of its manufacturing land in the span of just a few years.
“Every year we look at scores of sites,” says Coleman. “We bid on buildings and don’t get them. Last few buildings we’ve bid on, we’ve lost to self-storage facility operators. We can’t offer the same pricing that some of these competing uses can.”
The city is now trying to reverse the tide, and make manufacturing once again a priority for development. Earlier this month, the NYC Economic Development Corporation (NYCEDC) announced GMDC as the first awardee of a new Industrial Developer Fund, created to support nonprofit and mission-driven industrial development in NYC.
GMDC is getting a $3.7 million loan and a $10 million grant to support the conversion of an 85,000-square-foot former bicycle factory into a multitenant manufacturing building in Ozone Park, Queens. The total estimated cost for the project is $37 million, which GMDC plans to cover by assembling other grant sources, investors and tax credit sources. It’s in a census tract eligible for federal New Markets Tax Credits, which are increasingly supporting manufacturing. Based on job density at its current buildings, GMDC estimates the new building would house 80 permanent jobs.
“A storage operator would have three or four jobs on the same site,” Coleman says.
By supporting nonprofit and mission-driven developers, the city can hit on multiple public policy goals, starting with affordability.
“The problem that we’re really solving for in NYC is there really is a scarcity of industrial real estate, and that land is becoming increasingly expensive and therefore harder and harder for industrial companies to buy that space or rent that space,” says Jeff Lee, head of strategic investments at NYCEDC, the city’s economic development authority.
Nonprofit developers can help with job creation too. “With so many tenants competing for space, the landlord can make a judgment call,” says Adam Friedman, executive director at the Pratt Center. “A typical private owner could just take the highest bidder, while a nonprofit can decide who is going to create the greatest job density, who is going to hire locally, who is going to use sustainable manufacturing processes.”
Entry-level manufacturing jobs pay better than entry-level retail jobs, and offer more opportunities for advancement. According to its internal surveys of tenants, more than 91 percent of the people working in GMDC buildings are NYC residents, and 40 percent have a native language other than English.
“What that shows you is that even though manufacturing has changed a lot, there are fewer jobs around, but it’s still an entrée to the middle class especially for immigrants, as it has been for generations,” says Coleman.
The city set aside $64 million for Industrial Developer Fund last year as part of a package of reforms and programs, recognizing the value of protecting what’s left of the city’s industrial land and modernizing it for 21st-century manufacturing use. There has been significant progress on other parts of the plan, including new manufacturing spaces Brooklyn Navy Yard and Brooklyn Army Terminal.
But the prohibitively high cost of industrial land remains an issue. The package announced last year included reforms meant to deal with the problem head on, reforms that have yet to move forward. The biggest sticking point is a quirk of the city’s zoning laws, which currently allow hotel construction in industrial zones. When the city first created residential, commercial and industrial zones in 1961, it treated industrial zones as a catch-all for basically anything that didn’t fit neatly into residential, retail or office space.
NYC tourism has skyrocketed over the past decade. According to data from the Pratt Center and the New York Hotel & Motel Trades Council, which represents hotel workers, 180 new hotels were built between 2004 and 2013. Developers began cashing in by building hotels in industrial zones. The same study found over 120 hotels in existing industrial zones and more than 100 more in the pipeline.
“Hotels are cash cows, even if they’re moderately successful, so they can push out anything else, and they can lead to speculation,” says Friedman. “A property owner adjacent to a hotel starts to think differently about his property. It signals that an area might be changing.”
Last year’s reform package promised measures to limit hotel development (as well as personal storage facility development) in some industrial zones. The New York Times recently reported that the mayor and city council, after a year of silence on the issue, are now considering a broader proposal. But time is money, and nonprofit developers generally don’t have much to spare.
The Equity Factor is made possible with the support of the Surdna Foundation.
Oscar is a Next City 2015-2016 equitable cities fellow. A New York City-based journalist with a background in global development and social enterprise, he has written about impact investing, microfinance, fair trade, entrepreneurship and more for publications such as Fast Company and NextBillion.net. He has a B.A. in Economics from Villanova University.