The Downtown Reset Gains Momentum

Green shoots are finally visible in the office market with employees trickling back in greater numbers and once-theoretical office-to-residential conversions starting to rebalance supply. Office vacancy rates remain painfully high, but cities like New York, Minneapolis and Denver are re-thinking ways to turn dark office towers into homes and - for now - the momentum feels real.

Denver kickstarts conversions. Backed by a $570 million Downtown Development Authority (DDA) plan, the city committed its first $100 million in catalytic investments this summer. Those funds are seeding the first major downtown conversions, albeit for a relatively small number of additional housing units. It’s encouraging to see progress, though in order to truly reshape the downtown core, the city will need to address its longstanding permitting issues (which are improving but not yet resolved), the legislative challenges and uncertainty around Regulation 28 and Energize Denver, and expand financial incentives beyond the select few awarded DDA funds.

Minneapolis leans on faster approvals. The city has cut red tape with expedited approvals and modifications to its parking and inclusionary zoning requirements. The Northstar Center East conversion delivered 216 apartments in 2024, but most other projects remain financially infeasible. Streamlining helps, but without stronger incentives, the pipeline is in limbo. A proposed state tax credit could change the math, but unless and until it’s passed, the conversion pipeline could remain stalled.

New York City is setting the pace. In the last five years, conversions of icons like One Wall Street, 55 Broad Street, and 25 Water Street have delivered thousands of new apartments, stripping millions of square feet of obsolete office space out of circulation. A new state tax incentive (467-m) and zoning reforms are fueling the next wave, with projections that more than 10 million square feet could be transformed into badly needed housing. By tackling both administrative and financial barriers, New York City has become a compelling national model for how to make conversions work.

Why it matters? With millions of square feet of office potentially suitable for conversion, these projects not only chip away at vacancies but also help revive neighborhoods that have lost foot traffic, tax revenue and vitality. Minneapolis has shown how administrative relief can help, and Denver is deploying targeted funds to spark activity. But New York City demonstrates that true momentum comes from addressing both red tape and financial incentives at once. Its approach offers the clearest roadmap for other cities looking to transform empty offices into vibrant, livable downtowns.