📰 What Happened: As office vacancy rates rise across the country, more cities are looking to repurpose empty office buildings for residential and other uses. In May, the national office vacancy rate reached 19.4%, a 160-basis-point increase from 2024. In response, cities like Manhattan and San Francisco ramped up efforts to convert office spaces into housing, with over 149 million square feet of office space proposed for conversion.

🔍 A Closer Look: While office demand has softened, especially in markets like San Francisco (with a 28.4% vacancy rate), cities are turning to adaptive reuse as a solution. Manhattan is targeting 23 million square feet for conversion, with 19.5% of its office stock classified as top-tier. Programs like NY's Office Conversion Accelerator are also simplifying zoning and permitting, as San Francisco offers tax waivers and reinvestment strategies to incentivize conversions.

🧠 Why It Matters: As office demand cools down this summer, adaptive reuse is seen as a key strategy to combat nationwide housing shortages and optimize vacant office spaces. This shift presents new opportunities for commercial developers and property owners to pivot away from traditional office uses to meet evolving urban needs.