August 05, 2025
For the first time in over two decades, more office space is being torn down or repurposed than built — and it's flipping the script on what we’ve known about commercial real estate.
In 2025, an estimated 23.3 million square feet of office space will be demolished or converted, while only 12.7 million square feet of new office construction is expected. The office era, as we knew it, is officially in retreat.
This massive shift is a direct response to the remote work culture that exploded during the pandemic and has refused to fade. Even as employers push return-to-office mandates, vacancies remain stubbornly high — hovering around 19%. That’s led to many buildings being labeled “functionally obsolete,” especially the older, outdated office properties.
But this isn't just about empty desks — it's about opportunity.
Cities like New York are leading the charge in office-to-residential conversions. Developers are turning once-prized commercial spaces into much-needed housing. The iconic 5 Times Square, once home to Ernst & Young, is being reimagined as a residential tower.
25 Water Street in FiDi set records as the largest office-to-resi conversion in U.S. history. Over 85 million square feet of office space is now being primed for conversion in the coming years, and NYC alone could see 8,000+ new apartments emerge from repurposed office buildings.
This trend is not just a win for developers — it’s a silver lining for renters, too. More housing supply, especially in transit-friendly locations, could help tame NYC's sky-high rents and breathe new life into areas that were previously 9-to-5 ghost towns after dark.
From a real estate perspective, we’re watching the commercial market recalibrate. Class A office owners will benefit from less competition, and savvy investors who can execute strong conversions are poised to dominate.
This is also the perfect moment for residential-focused players to explore mixed-use opportunities and for city planners to rethink zoning for a more livable, modern New York.
The office isn’t dead — it’s being reborn as someone’s living room.
Disclaimer: This content is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice.
