Manhattan offices turn into homes: a wave of redevelopment in New York

Photo: Bloomberg

New York City officials and major developers are launching an ambitious program to convert offices into housing. In the heart of Manhattan, projects are underway that will add thousands of new apartments and help ease the city’s acute housing shortage, Bloomberg reports.

The Pfizer project and the start of conversions

Pfizer’s former headquarters on East 42nd Street is set to become the largest office-to-residential conversion in the United States. Developers Metro Loft and David Werner Real Estate Investments will remake two tower buildings to deliver about 1,600 apartments with a rooftop pool and fitness center. Architect Robert Fuller of Gensler notes the building must be reworked almost surgically—re-slicing floor plates and reinforcing the structure. Completion is expected in 2026.

Interest in conversions is boosted by program 467-m tax benefits, which provide 35 years of stable property taxes if at least 25% of units are designated as affordable. Metro Loft managing partner Nathan Berman says the measure removes uncertainty and allows developers to model project economics precisely.

The push to repurpose offices answers a chronic housing shortage. In August, Manhattan’s median rent hit $4,600, 8.4% higher than a year earlier (Douglas Elliman / Miller Samuel). Demand for housing is rising while many office towers remain partly empty: the U.S. office vacancy rate reached about 23% in Q2 2025 (Jones Lang LaSalle).

Program 467-m and Midtown’s conversion boom

The 467-m tax incentive program, administered by the NYC Department of Housing Preservation & Development, provides up to 35 years of property-tax relief for projects where at least 25% of apartments are affordable. These measures significantly improve conversion economics and reduce investor uncertainty.

By mid-2025, Midtown accounted for 60%+ of all office-conversion square footage in Manhattan, with total projects surpassing 4 million sq ft—more than in all of the previous year, CBRE reports. Analysts note the average age of conversion buildings is about 68 years, and Midtown has become the epicenter thanks to falling office prices and looser planning constraints.

Across the U.S., office-to-residential pipelines reached 81 million sq ft by May 2025 (about 7.5 million sq m), up 10 million sq ft in six months. Nearly half are in Manhattan, with the city center gradually overtaking the Financial District, where large-scale housing conversions first gained traction in the 1990s.

Zoning and new projects

In Midtown, work has begun on buildings formerly owned by Ernst & Young, the Archdiocese of New York, and other major holders. SL Green Realty is converting a 35-story tower on Third Avenue into 600 apartments, while TF Cornerstone is turning an office near Central Park into 350 units.

Regulatory shifts opened new opportunities. The city lowered the age threshold for buildings eligible for conversion, eased density limits, and expanded the list of areas where housing is permitted. In August 2025, a Midtown South rezoning plan was adopted, creating potential for 9,500 new apartments.

City officials expect downtown renewal to solve two problems at once—excess vacant offices and housing shortages. “Conversions offer a chance to revitalize business districts and create much-needed homes at the same time,” said Dan Garodnick, chair of the city’s planning department.

Over the past two years, Manhattan’s office inventory shrank by almost 2% to 416 million sq ft. New York has become the national leader in redevelopment, ahead of Chicago and Washington, D.C. If all announced projects are completed, a further 21 million sq ft—around 7% of the 2023 office stock—will leave the market.

According to Metro Loft, converting older towers is cheaper than ground-up development and typically takes ~18 months, versus up to seven years for new construction. The remaining apartments in the former Pfizer complex will be offered at market-rate (mid-to-prime) levels, with about one-quarter leased at regulated affordable rents. As a result, Midtown—where residential space is still only ~14% of total area—is turning into a new growth node. City Hall and developers expect not only more housing but also a fully-fledged urban environment to bring life back to the heart of Manhattan.

Across the U.S., office-conversion pipelines reached 81 million sq ft by May 2025 (about 7.5 million sq m), up 10 million sq ft in six months. Nearly half are in Manhattan, with the core gradually displacing the Financial District, where mass conversions first took off in the 1990s.