While New York City’s office market remains in flux, new reports indicate that office demand has finally stabilized. However, a "flight to quality" is reshaping the landscape, with business leaders prioritizing premium office spaces to attract and retain talent in the era of hybrid work. As a result, landlords of aging Class B and C buildings are exploring ways to revitalize their properties. Converting outdated offices into residential homes has long been seen as a promising solution—but the challenges of such transformations are daunting, both financially and logistically.

We sat down with Matthew Adell, CEO and founder of Adellco, to discuss what makes a successful office-to-residential conversion, the challenges developers face, and how these transformations will shape the future of the city.

 As a developer and investor, we [Adellco] are always looking to find the highest and best use for a property. Taking older office stock that is stressed or distressed and finding a higher and better use is what we do all the time. While converting to other commercial uses is an option, residential conversion is often the best path to rescuing a distressed office building.

 For us, we focus on what’s legally possible rather than negotiating with tenants. Some buildings generate enough net operating income to remain viable until leases expire. Buying an occupied building with the intent of converting sometime in the future can be a less risky move

Matthew Adell: It depends. Residential floor plates are very different from office floor plates. Large, deep layouts that worked for office tenants may not be easily adapted for livable apartments. 

The feasibility of converting offices to any other use is very building specific. One must weigh the cost of reconfiguring the exterior, the elevator, stair, and mechanical core, while providing the units with enough light. Sometimes it's best to demolish. There’s just no way to generalize.

Matthew Adell: Whether a condo project pencils out is determined by the cost of the market tier the developer is venturing in.

In rental conversions, longer hallways and efficient spaces may be feasible. However, to create more generously sized residences, developers must carefully project how much revenue each unit can generate per square foot. Creating a unit that is too large may result in an apartment that exceeds market demand.

Condominium buyers consider both price per square foot and the overall cost of a unit. Oversized residences are neither inherently good nor bad, but the market must support them.

Sometimes, you have a beautiful old building that cannot be replicated. If there is value in preserving it and the market is likely to respond positively, then a condo conversion may very well be viable.

RJ Capital Holdings and Top Rock Holdings have filed plans to convert a 14-story office building at 609 Fifth Avenue into a 29-story mixed-use tower comprising 76 ultra-luxury residential units. The development is located across the street from two iconic properties, Saks Fifth Avenue and Rockefeller Center. 

The project will add approximately 93,000 square feet to the former SL Green property, bringing its total size to about 226,000 square feet and increasing its height from 187 feet to 400 feet. Rafael Viñoly Architects, the firm behind 432 Park Avenue, is listed as the architect of record, with design featuring a series of stacked boxes and new glass facade. 

The building's new layout is slated to feature apartments on the first, third, and fifth through 28th floors, with offices on the fourth and fifth floors. The 29th floor will be used for storage. The property will include 41 parking spots for bicycles as well.

Sitting atop Grand Central Terminal, The Helmsley Building is a 35-story skyscraper built in 1929, originally known as the New York Central Building and designed by Warren & Wetmore, who also designed Grand Central in a similar Beaux-Arts style. The landmarked, 34-story debt-burdened building has a stunning marble and bronze lobby and gilded elevators. Imagine how extraordinary the penthouse will be with that copper pyramid roof capped with a cupola and wrap-around terrace. 

Its owner, RXR Realty announced plans to partially convert the building into apartments, but in December 2024, the building's mortgage lenders filed a foreclosure action in New York state Supreme Court, according to Crain's New York. A spokesman for RXR told Crain's that RXR “continues to have constructive conversations with the lenders.”