From Vacant Office Towers to Residential Communities: NYC Pursues 20,000-Unit Conversion Goal Over Decade
Manhattan’s Dramatic Reimagining: Offices Become Homes
The post-pandemic commercial real estate crisis has created an unexpected solution to New York’s housing shortage: mass conversion of vacant office buildings to residential use. As of the first quarter of 2025, 44 completed, ongoing, and potential conversions total 15.2 million gross square feet, which could absorb more than one third of the occupancy lost since the fourth quarter of 2019 in the lower tiers of the market, and produce approximately 17,400 apartments, the majority of which are studios and 1-bedrooms available for rent.
The Market Dynamics Driving Conversions
Manhattan currently has a 19.8% office vacancy rate, while residential vacancy rates have plummeted to just 1.4% citywide. This stark contrast creates economic incentives for conversion. Office building values have collapsed by as much as 64% from pre-pandemic levels, while residential rental rates have increased by 22% compared to just 1% for office space since 2020. This shift has created what developers call a “conversion opportunity zone”–when acquisition costs are low enough and residential demand is high enough to make complex projects profitable.
Government Incentives Making Projects Viable
Policy has transformed market conditions. The Affordable Housing from Commercial Conversions Tax Incentive (467-m) offers up to 90% property tax exemptions for 35 years. The 467-m program provides up to 90% property tax exemptions for 25-35 years for projects including at least 25% affordable housing. The incentive eliminates tax uncertainty that traditionally deters multi-year residential projects.
Accelerating Project Timeline and Scale
The pace of conversion activity is unprecedented. Conversion starts reached 1.6 million square feet in 2023 and more than doubled to 3.3 million square feet in 2024. Already in 2025, 4.1 million square feet of conversions have commenced through August–surpassing the entirety of 2024 in only eight months. By comparison, 2004 to 2022 saw an average of just 1.2 million square feet of office-to-residential conversions.
The Largest Projects Leading the Way
Challenges in Design and Implementation
Not all conversions produce ideal results. Constraints from original office configurations may result in unusual apartment layouts, and converted apartments can lack adequate natural light and windows, attractive ceiling heights, views–all of which are essential for creating desirable homes. Finding useful purposes for dead interior space remains a design challenge.
Housing Goals and Citywide Ambitions
The owners of 64 New York City office buildings are interested in converting their properties into housing, according to new data from the Department of City Planning, with four buildings involved with the accelerator program having successfully converted to residential apartments or begun construction, for a total of about 2,100 new apartments. Office-to-residential conversion represents a pragmatic response to intersecting crises: abandoned commercial real estate and desperate housing scarcity. Success depends on whether the projects include genuinely affordable housing at sufficient scale and whether design quality ensures these converted spaces become desirable homes.
