It was time for the real estate developer to face facts: No one was really using the common space on the second floor of his new Harlem apartment building.
Rather than let the room remain dormant, the developer, Josef Goodman, had an idea. Why not turn it into something that the neighborhood, rather than just the building’s residents, actually needed: a child care center.
On a recent weekday morning, a dozen toddlers who live nearby passed the deli on the building’s ground floor and climbed a flight of stairs to the revived lounge space, converted last fall into Little Legacy Village Preschool. They gathered on a rainbow mat and wriggled into a downward dog and child’s pose for a yoga session to start off the day.
The preschool is part of an emerging alliance between real estate, one of New York City’s most powerful industries, and child care, one of its most beleaguered.
David and Goliath being on the same team confers mutual benefits.
The city’s child care operators are often desperate for space but strapped for cash. Developers can offer deals on rent or help with converting vacant spaces — all while offering wary neighbors an amenity that, unlike a pet spa or a cold plunge, might actually make their lives easier.
There is widening concern among the city’s captains of industry that the soaring cost of child care is bad for business.
Families with young children have been leaving New York in large numbers since the coronavirus pandemic. A report by the left-leaning Fiscal Policy Institute found that families with children under 6 were about twice as likely to leave the city than New Yorkers without children. Families have cited concerns about the lack of access to convenient, affordable child care.
The city has lost about 8 percent of its licensed child care providers in the past 10 years, according to a recent report, and some neighborhoods have no licensed providers at all.
The Real Estate Board of New York, a powerful lobbying group, has taken notice.
Last year, the organization launched a campaign with District Council 37, a union representing some of the city’s lowest-paid child care workers, to push politicians to increase the city’s child care tax credit and make it easier to open new centers.
And the real estate group has been eager to highlight child care spaces included in new buildings.
“We have been seeing this expanding universe of common areas that are provided for some sort of public good,” said Jonathan Miller, president of the appraisal company Miller Samuel.
“It’s hard for many to see a developer as altruistic,” he added. “But the idea is that it’s not being done for altruism, it’s being done for community acceptance, and that is a very important component of development.”
For Mr. Goodman, the founder of Haussmann Development, creating child care space achieves a few goals at once.
It might make it easier for him to retain tenants, some of whom he said tended to leave his buildings or the city altogether after they started having children.
Also, it never hurts to have the community on your side. “Generosity is your best form of marketing, right?” he said. “And then you’ve developed a reputation where people begin to trust you, and they allow you to build.”
Mr. Goodman worked with Erica Forte, an educator who runs a day care center out of her home down the block from Little Legacy, to open the space. Haussmann spent about $100,000 and used its in-house construction and accounting teams to help convert what Mr. Goodman called a “white vanilla box” into a colorful classroom. Most of the students use city-funded child care vouchers to pay tuition.
Sometimes, including child care in a new development can help build neighborhood support.
Some residents of Windsor Terrace, a low-rise Brooklyn enclave, opposed the development of two new apartment buildings on the site of a commercial laundry building nearby, arguing that the relatively tall buildings would be out of scale with the neighborhood and would not offer enough affordable housing.
When the City Council approved the development in February, the deal included a sweetener: ground floor child care space.
At 655 Union, a new luxury building in Gowanus, Brooklyn, there is a 25-yard pool outside and a wellness studio upstairs. On the ground level, the building’s developers have leased 3,700 square feet to NY Kids Club, a preschool.
And in Inwood, one of the last affordable neighborhoods in Manhattan, some residents worried about the height of a new building — the Eliza — the latest development to feature apartments built on top of new public libraries. When the Eliza opened last year, it included a public prekindergarten center.
While early childhood experts praised those arrangements, they cautioned that they represented only a fraction of the child care seats that the city needed.
Tara Gardner, the executive director of the Day Care Council of New York, said she hoped the real estate industry would consider subsidizing the salaries of child care employees who worked in its buildings. Many such employees make just over minimum wage, and people are leaving the child care industry in droves.
“We can create all the spaces and capacity we need, but if there’s no work force, it’s all for naught,” she said.
It remains to be seen just how far the real estate industry will go in supporting child care. In the meantime, some child care operators are creating their own playbooks for how to work with developers.
Vivvi, a venture-capital-backed child care network with 10 city locations, is a tenant of some of the most powerful real estate groups in the city. The network struck a deal with Related Companies, which helped develop Hudson Yards in Manhattan, to become the sprawling development’s exclusive child care provider, with the goal of bolstering attendance in office buildings.
Vivvi also offers child care benefits through NewYork-Presbyterian, one of the city’s largest hospital systems and a real estate juggernaut in its own right. A Vivvi location near the hospital’s Upper East Side location offers child care from 6 a.m. until 8 p.m., to accommodate medical workers’ schedules.
It pays to work with some of the city’s wealthiest landlords who can take on more risk, said Charles Bonello, Vivvi’s chief executive. Developers can help make their vacant spaces safe for young children, offer deals on rent until a day care facility is fully enrolled or charge child care tenants a percentage of the revenue they generate, rather than a fixed monthly rate.
“The smartest and best landlords understand that it’s not just the dollar per square foot you can get from a tenant,” Mr. Bonello said. Instead, developers can “offer something that will drive interest and value to other holdings.”
That is part of the reason that Jeff Gural, chairman of GFP Real Estate, started working child care into his real estate empire decades ago.
In the 1990s, Buckle My Shoe Preschool was on the verge of being priced out of its space in TriBeCa, where landlords were beginning to raise rents.
One of Mr. Gural’s grandchildren happened to attend the school. And his company happened to own a 8,500-square-foot bank space nearby that was in need of a tenant. He turned the space into a preschool and provided scholarships for the city government employees who worked upstairs.
A few years ago, Mr. Gural contributed $2 million to help convert another bank building he owned into a West Village location for Buckle My Shoe. Now, he offers half off the cost of the branch’s tuition for many of the tenants in GFP’s office portfolio.
Mr. Gural is pragmatic about where this kind of arrangement will work, and where it won’t — renting out prime retail space in SoHo to a preschool, for example, might not be a good bet.
But Mr. Gural said he had been shocked by how much his own relatives were paying for child care these days.
“The most important thing for the city is to be able to attract young people who want to live here,” he said. “If that ever changes, we’re in big trouble.”
Eliza Shapiro reports on New York City for The Times.
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