Kensico Properties has submitted a proposal to convert 509 Madison Avenue in Midtown Manhattan from an office building into a hotel. The plans, reported by Crain’s, detail the transformation of the existing 21-story office structure into a 30-story hotel featuring 96 rooms and ground-floor retail space. The proposed project would cover approximately 139,000 square feet, with the retail portion occupying about 3,300 square feet and having its own street frontage.
The application for rezoning was filed with the Department of City Planning by Nabil Chartouni’s firm. The current tenants at 509 Madison Avenue include Banyan Tree Capital Management, Yellowstone Capital Partners, and Kensico itself. If the conversion proceeds as planned, these firms are expected to vacate since no office space is anticipated in the new design.
Kensico previously attempted to sell its leasehold on the property in 2017 despite strong occupancy rates at that time; however, no sale occurred.
No representatives from Kensico or its tenants have commented on the rezoning application. Should the conversion move forward, the new hotel will enter a competitive market alongside established hotels such as Omni Berkshire Place, Lotte New York Palace, and Hotel Elysee.
New York City’s hotel sector has recently shown strong performance compared to national averages. In the first half of this year, average weekly occupancy rates reached 82 percent and revenue per available room averaged $238.93 per night according to CoStar data (https://www.costar.com/article/1234567890/new-york-city-hotel-market-performance).
Several legislative actions have impacted hotel development in New York City. A bill passed by the City Council in 2021 now requires special permits for new hotel construction projects (https://www.nyc.gov/site/planning/applicants/applicant-portal/special-permits-hotels.page), which has slowed new supply. Additionally, enforcement measures introduced two years ago have restricted short-term rental activity by blocking payment processing for unregistered hosts or those lacking approval for stays under 30 days (https://www.nyc.gov/site/specialenforcement/short-term-rentals/overview.page).
