Source: Cushman & Wakefield
Since the onset of the pandemic, New York City has witnessed an unprecedented surge in office-to-residential conversions. Once a niche redevelopment strategy, conversions have become a defining force reshaping Manhattan’s skyline. With persistently high vacancy rates, aging building stock, and mounting pressure to expand the city’s housing supply, conversions are increasingly viewed as both an economic and policy-driven solution.
Conversion Momentum Accelerates
Cushman & Wakefield reports that conversion activity has soared to record levels — from an average of less than 1.2 million square feet (msf) annually before 2020 to 1.6 msf in 2023, 3.3 msf in 2024, and 4.1 msf as of August 2025. The current pipeline adds another 8.8 msf across 25 properties, signaling sustained momentum well into 2026.
This growth reflects not only market adaptation but also necessity: Manhattan’s office vacancy remains elevated at 22.3%, nearly double pre-pandemic norms. Conversions offer a modest yet meaningful release valve for this oversupply — potentially lowering overall vacancy to 21.5%, and to 20.0% Downtown, if all planned projects advance.
Policy and Financial Catalysts
A combination of policy reforms and valuation resets has been instrumental in unlocking conversion potential.
The Office Conversion Accelerator Program (2023) streamlined approvals, while the 467-m tax incentive (2024) extended up to 35 years of tax relief for projects incorporating affordable housing.
The City of Yes zoning reform and lifting of the 12 FAR cap in 2025 further expanded eligibility, especially across Midtown and high-density zones.
Meanwhile, Manhattan’s office sale prices fell 45% from their 2019 peak, narrowing the gap with development site values and making conversions financially feasible.
Evolving Geography and Asset Mix
The geography of conversion activity has shifted dramatically.
Midtown now accounts for over half (54.8%) of post-2020 conversions, overtaking Downtown, which previously dominated with 51.6% of pre-2020 projects.
Equally notable is the rise of Class A conversions: once just 5.5% of projects before 2020, they now comprise over one-third of conversions and a majority of future proposals (52%).
This evolution signals not only the scale of the market shift but also a recognition that even high-quality buildings may face obsolescence without repositioning.
Vacancy Relief and Housing Gains
While conversions alone cannot rebalance Manhattan’s office market, their cumulative impact is material. Downtown, where inventory has already contracted 19.3% since 2004, stands to benefit most — reinforcing a decades-long pattern of adaptive reuse. Flagship projects such as 25 Water Street, the largest office-to-residential conversion in U.S. history (1.1 msf, 1,320 units), underscore both the ambition and feasibility of these transformations.
Outlook: Conversions as a Structural Force
The surge in conversions represents more than a temporary market correction — it is a structural realignment of urban space. As policy frameworks continue to evolve and financing conditions stabilize, the intersection of housing need, sustainability, and underutilized office supply will keep driving the trend forward.
In Cushman & Wakefield’s view, conversions are not a panacea for vacancy but rather a strategic lever for urban renewal, one that is redefining investment priorities and the physical fabric of Manhattan.
The information provided in this article, including, without limitation, any opinions, predictions, forecasts, commentaries or suggestions, is for informational purposes only and should not be construed to be professional or personal investment, financial, legal, tax or other advice.