Office-to-Residential Conversions: The Future of New York Real Estate

Industry News
2 days ago
3 min read

As a long-time player in the New York real estate market, I've seen a lot of trends come and go, but the current wave of office-to-residential conversions is a fundamental shift in how we use space in this city. This isn't just a temporary reaction to remote work; it's a structural change, and the data from Comptroller Brad Lander's office proves it.

The Comptroller's report notes that the post-pandemic conversion pipeline includes 44 buildings totaling 15.2 million gross square feet, with the potential to create approximately 17,400 apartments. This is a massive undertaking that could absorb over a third of the occupancy lost in the lower tiers of the Manhattan office market since the fourth quarter of 2019. The conversion activity is already on track to exceed the totals seen during the 421-g program in the Financial District in the 1990s and 2000s, and to triple the production of residential units from commercial space seen from 2012 to 2020.

What makes this moment unique is the clear divergence in the office market. From the fourth quarter of 2019 to the first quarter of 2025, occupied space in "5-Star" buildings grew by about 11.5 million square feet, while it declined by 43 million square feet in the rest of the market (Class A ex-5 Star and Class B & C). This is a clear indicator of the widening gap between high-end office spaces and the older, more economically obsolete buildings that are ripe for conversion.

This divergence has created a dramatic reset in valuations. The average price per gross square foot for converted buildings since 2020 is $276, a 45% decrease from before 2020. Some individual properties show even more dramatic declines.

This drop in value creates a prime opportunity to acquire these assets and repurpose them. For seasoned investors, these aren't red flags—they represent one of the most compelling entry points in decades.

The city and state have responded with crucial policy changes that make these conversions not just possible, but financially attractive. This provides tax benefits for up to three years during construction and for between 20 and 35 years afterward, depending on the project's start date. To qualify, at least 25% of the new apartments must be income-restricted and rent-stabilized in perpetuity.

This zoning amendment now allows conversions for buildings built before 1991, dramatically expanding the pool of eligible properties. To secure the full 35-year 467-m abatement, projects must be approved by June 2026. With planning and filings often taking a year or more, the clock is already ticking.

Conversions aren't new to New York. The difference today is the sheer scale. We're not just looking at a handful of trophy assets. Some of our most celebrated buildings have undergone this transformation:

The Woolworth Building → now home to 33 luxury residences
One Wall Street → converted into residences and retail
70 Pine Street → now offers 600 apartments with amenities
The Plaza Hotel → includes luxury condominiums

Summary Data on Post-2020 Office Conversions:

Total Buildings: 44
Total Gross Square Feet: 15.2 million
Total Apartments: 17,432
Rentals: 32 buildings, 13.5M gsf, 16,510 units
Condominiums: 12 buildings, 1.8M gsf, 922 units
Eligible for 467-m: 27 buildings, 12.6M gsf, 15,414 units

For building owners, conversions may be the smartest way to unlock trapped value in underperforming assets. For investors, discounted valuations, record housing demand, and unprecedented policy support create a once-in-a-generation opportunity.

New York has a finite amount of land, but our demand for housing—particularly quality rentals—has never been greater. Office-to-residential conversions provide a rare win-win: underutilized buildings are reborn as vibrant residences, while owners and investors unlock value in assets that might otherwise remain stagnant.

The future of New York real estate won't be defined by who has the best listings—it will be defined by who sees the possibilities before everyone else does. And right now, those possibilities are being built, one conversion at a time.