According to a new Cushman & Wakefield study, 3.3 million square feet of office space began conversion in 2024, up from 1.6 million square feet in 2023.
The momentum has continued with an additional 4.1 million square feet of conversions initiated through August of this year.
These transformations are reshaping the character of Midtown neighbourhoods that have historically been dominated by office towers, hotels, and entertainment venues.
The conversions will bring residential energy to areas that typically become quiet after business hours.
Several prominent buildings on Third Avenue in the East 40s and 50s are undergoing conversion, as well as 135 E. 57th Street at Lexington Avenue, which was once a symbol of the late-1980s office development boom.
One of the most significant projects is RXR’s conversion of 5 Times Square into 1,250 apartments, transforming one of the quartet of West 42nd Street towers that had revitalised Times Square.
Cushman & Wakefield senior research manager Reed Hatcher pointed to policy changes as key drivers of this trend.
“Policy support was helping to accelerate conversions, namely, rezonings by the city to make conversions possible where they weren’t previously allowed, along with state-approved tax incentives to sweeten the deals for developers,” Mr Hatcher said.
The rezoning of Midtown South, passed last summer, has already yielded results.
A partnership recently purchased the 12-story building at 29 W. 35th Street with plans to create 100 studio apartments.
These conversions address two simultaneous crises facing New York City: the rental housing shortage and the increasing obsolescence of older office buildings.
The transformation of commercial space into residential units has contributed to a significant reduction in Manhattan’s office inventory.
According to Savills, Manhattan’s office inventory dropped from 466.1 million square feet in the second quarter of this year to 449.4 million square feet in the third quarter.
While most conversions before 2020 were concentrated in Lower Manhattan, particularly in the Wall Street area, the trend has now spread to Midtown.
The former Pfizer headquarters at Third Avenue and East 42nd Street is being transformed by MetroLoft Developers and David Werner Real Estate Investments into 1,602 rental homes, making it the largest such project in the United States.
SL Green is creating over 600 rental units at 750 Third Avenue, where 13 floors are being modified on one side to create a winter garden.
