New York City has entered a defining new chapter in housing development, spurred by widespread office-to-apartment conversions that are reshaping its skyline and offering innovative solutions to the city’s lingering vacancy crisis. At the forefront of this transformation is 25 Water Street, formerly known as 4 New York Plaza, which has officially become the largest such project in U.S. history. As of early 2025, over 1,300 residential units have been leased in the building—affectionately rebranded as “SoMA”—with Citi Home and Metroloft reporting roughly 85% occupancy just six months into leasing, driven primarily by strong interest in studios and one-bedroom units.
This adaptive reuse of office stock aligns directly with sweeping local policy changes. In response to skyrocketing office vacancy—hovering around 16% citywide—and NYC’s acute housing shortage, the state and city introduced powerful financial incentives and bureaucratic reforms. Among the most impactful is the 467‑m property tax incentive, passed in the 2024 state budget, which allows developers to receive up to 90% tax abatements for 25–35 years, provided at least 25% of units are affordable. The 2024 NYC zoning overhaul—part of the “City of Yes” reforms—has further eliminated density restrictions and streamlined approvals for conversions.
New York’s comptroller released a report in July 2025 projecting that office conversions could yield nearly 17,400 new apartments across 15.2 million square feet of previously vacant space. Already, local office-to-residential projects include conversions of 55 Broad Street, 111 Wall Street, and the iconic Pfizer Midtown headquarters—collectively adding more than 5,000 units.
Developers and planners describe the conversions as a timely remedy to an oversupplied office market and the city’s broader affordability crisis. As The Wall Street Journal notes, “turning underutilized Manhattan office buildings into residential apartments is emerging as a financially viable solution to New York City’s critical housing shortage”. The Journal emphasizes that office buildings can often be acquired for 70–80% below peak valuations, and although conversions reduce leasable square footage by about 25%, the resulting residential rents—especially in tight markets—justify the cost.
At 25 Water Street, the transformation involved gutting the original 1969 brutalist office tower, adding ten new stories, and installing over 100,000 square feet of amenity space including pools, fitness centers, coworking lounges, and indoor sports courts. Alongside luxury units, a housing lottery launched in March 2025 offers 330 rent-stabilized apartments to low- and moderate-income households, further aligning with the tax-incentive requirements.
Challenges remain. Conversion costs can rival or exceed acquisition costs, often due to structural retrofits like facade demolition, creation of light wells and atriums, and compliance with new residential codes. Moreover, with the mandatory rent-stabilized units tied to city rent guidelines, some developers express concern that proposed rent freezes in future elections could undermine conversion profitability.
Despite these risks, interest continues. CBRE reports that Manhattan’s conversion boom “is about more than just repurposing space—it’s about reimagining the city,” as aging office stock is turned into vibrant mixed-use communities. The New York metropolitan region currently leads the nation, with over 8,300 conversion units in the 2025 pipeline—a 59% increase from 2024—surpassing even Washington, D.C.
The conversion trend is also influencing other neighborhoods. Projects like 5 Times Square, poised to add 1,250 apartments, have received approval and are advancing, signaling a wave of change beyond Lower Manhattan.
In summary, NYC’s aggressive office-to-apartment strategy—facilitated by tax breaks, zoning reforms, and creative redevelopment—has rapidly accelerated, with 25 Water Street now leasing the largest such conversion in U.S. history. With tens of thousands of units expected in coming years, these projects offer a dual solution to vacant offices and unmet housing demand. While financial and political unknowns linger, the model is proving to be a viable path toward reshaping New York City’s built environment and addressing its housing crisis.