Office-to-residential conversions surge in 2026 amid high office vacancy rates, with projects doubling in key U.S. cities such as New York. U.S. office vacancy rates reached 19.8% in late 2025, stabilizing around 19-20% into 2026 amid hybrid work shifts. Cities face notable gaps, such as San Francisco’s 35% in downtown areas, leaving millions of square feet idle. This pressures owners to pursue adaptive reuse for housing.
NYC Conversions Double
New York City leads with 9.5 million square feet of office-to-residential projects set to start construction in 2026, doubling the 4.3 million square feet from 2025. Nationally, conversions hit record levels in 2025, with 73 projects completed in 2024 and 30 more underway. Pipelines grow due to zoning changes and incentives.
Top Cities and Pipelines
New York plans over 8,300 units, including Tower 57’s 350 apartments. Washington, D.C. targets 6,533 units through its downtown program. San Francisco has the potential to add tens of thousands from vacant stock.
CityPipeline UnitsVacancy RateKey Incentive
New York 8,300+ 20%+ $467M tax abatements
Washington D.C. 6,533 Elevated 20-year abatements
San Francisco High potential 35% Financing districts
New York’s City of Yes covers 1990s buildings with $467 million in abatements. Boston grants 75% tax relief for 29 years, Seattle defers 10.3% sales tax. Costs range from $300,000 to $500,000 per unit.
Conversions revitalize downtowns, blending housing with business activity. Expect growth in secondary markets as policies expand.
Image Credit – Getty Images.
