New York is ground zero for one of the biggest real estate shifts in decades: turning empty office towers into housing.

Driven by a housing shortage, policy changes under former Mayors Bill de Blasio and Eric Adams, and a looming financial squeeze on commercial real estate, buildings are being retrofitted at a record pace.

Nationwide, 90,300 apartments are currently in the conversion pipeline, nearly four times the level in 2022, according to a report from RentCafe.

But no market comes close to New York, where 16,358 units are planned and activity has doubled, surging 97%, in just the past year.

The scale reflects both urgency and opportunity.

The city attracted 143,000 new residents in 2024, intensifying demand for housing. At the same time, an estimated 324.8 million square feet of office space in New York remains suitable for residential conversion, suggesting the boom has plenty of room to run.

The policy groundwork for this transformation was laid over multiple administrations. Under de Blasio and later Adams, the city loosened zoning restrictions to turn a niche strategy into a central pillar of housing policy.

“New York has developed the best set of rules in the country to encourage converting commercial space to residential use,” REBNY President James Whelan told the New York Post.

Developers have responded quickly.

The landmark Candler Building in Times Square is being converted into 176 apartments, including both market-rate and affordable units.

Downtown, 111 Wall Street — an office tower that struggled to attract tenants after the pandemic — is being transformed into more than 1,500 homes.

In Midtown, SL Green is carving 680 rental units out of 750 Third Avenue, while another project at 135 East 57th Street will add 350 new apartments.

The former Pfizer headquarters on East 42nd Street between Second and Third Avenues is being redeveloped into what is expected to be the largest office-to-residential conversion in New York, with roughly 1,600 rental units planned at an estimated conversion cost of $850 million.

Slated for completion around 2027, the new apartment building will also include an affordable housing component.

“Antiquated offices are being replaced with much needed housing that spurs new retail and more dynamic neighborhoods,” Whelan said.

 “COVID-19 is to the office market what e-commerce was to retail,” noted Peter Kolaczynski, director of research at Yardi Matrix. “There is simply too much office space in the market right now.”

By early 2025, national office vacancy had climbed to about 20%, with many buildings operating at barely half capacity. That’s left millions of square feet underused, opening the door to large-scale conversions in cities where new housing is desperately needed.

Washington, D.C. is following a similar path, ranking second nationally with 8,479 units in the pipeline.

There, conversions are part of a broader effort to revive downtown, which has struggled with reduced foot traffic as fewer federal workers return to offices.

Financial pressure is accelerating the trend in both cities.

“A massive amount of office building loans — over $213 billion — are coming due by the end of 2026,” said Doug Ressler of Yardi Matrix, adding, “Many of these office buildings have lost significant value.”

When those loans mature, landlords must refinance or pay them off — often forcing difficult decisions about whether to hold, sell or convert.

Conversions are not simple. Projects can take years and often require major structural changes to accommodate residential layouts, plumbing and natural light. Many developments now underway began several years ago and are only gradually moving toward completion.

Even so, office buildings have become the dominant category in adaptive reuse, accounting for 47% of all such projects nationwide, far outpacing hotels, industrial properties and other building types.

The question of affordability remains a sticking point. While many projects include some income-restricted units, the high cost of conversions means a large share of new apartments are priced at market rates, limiting their impact on the broader housing crisis.

Still, urban planning experts see the shift as part of a longer evolution and are enthusiastic about the trend.

As NYU professor Mitchell Moss sums it up: “We are creating new housing, without forcing people to relocate, by reinventing old office structures just as we did with obsolete manufacturing lofts in the 1970s and ’80s.”

Newsmax Wires contributed to this report.