Manhattan is seeing a wave of office-to-residential conversions, significantly boosting its rental supply. With the city’s fundamental development tax break, 421a, having expired in 2022, new construction had slowed. However, major conversions — like Vanbarton Group’s projects at 77 Water Street and 1011 First Avenue and Bushburg Properties’ plan for 80 Pine Street — are adding thousands of rental units back to the market. These projects are part of a trend expected to bring about 7,500 new rental apartments from conversions by 2028, accounting for over 40% of new rentals coming online, a record share.
This uptick in conversions is essential for Manhattan, which faces a severe housing shortage. Although the new tax incentive program, 485x, and an office conversion tax break aim to address this, challenges still need to be addressed, particularly around wage requirements and perpetual rent restrictions, which could discourage some developers.
Projects are now moving forward as office values adjust. One notable conversion is transforming the former Pfizer headquarters in Midtown into 1,500 rental units, marking the largest office-to-residential project to date. While conversions aren’t a complete solution to the city’s office vacancy or housing shortage issues, they are a promising strategy in a market desperately needing more rental options.
