🏙️ June CRE Newsletter – U.S. Market Pulse

As we move into summer, several key shifts are reshaping the U.S. commercial real estate landscape. Here’s what you need to know:

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🧱 Office Conversions Reach Historic Levels

For the first time in 25 years, more office space is now being demolished or converted than newly built in the U.S.

• 23.3 million sq ft of office space is expected to be removed by the end of 2025—compared to only 12.7 million sq ft of new office construction.

• In New York City alone, these conversions could cut inventory by nearly 4%—including conversions at 5 Times Square, 25 Water St., and former Pfizer HQ.

Why it matters: This recalibration is helping stabilize rents and boosting value for Class A office assets that remain in circulation.

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🛠️ Office-to-Residential: A Broader U.S. Trend

• Nationally, completed conversions rose to 73 in 2024, from 63 in 2023. Another 309 projects are planned or underway.

• Conversion hotspots include New York, D.C., and Chicago, driven by steep office value drops and increasing affordability.

This trend reflects a longer-term shift aligning commercial real estate with evolving urban needs—creating new housing stock while managing surplus office space.

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🔑 Key Takeaways

• The decline in office inventory is a realignment, not just a correction—benefiting remaining high-quality assets.

• Office-to-residential projects are now a viable and growing part of urban strategy, not just fix-and-flip plays.

• For commercial investors, focusing on quality over quantity and adaptive use strategies is key to navigating this evolving market.

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Our thesis that multifamily is still an in-demand asset is confirmed by these conversions. If you have questions about the CRE market, please reach out! We'd love to chat with you.

Best summer wishes,

— Missional Capital Group