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As ground-up construction across NYC becomes harder to finance, builders are turning to redevelopment projects instead.
Across Manhattan neighborhoods, giant office-to-residential conversions are delivering thousands of dwelling units. In Brooklyn, redevelopment has taken on a more piecemeal form: contractors are pursuing smaller expansion of residential one-two-family homes in traditionally low-rise neighborhoods.
The projects in both boroughs show how builders are strategizing to keep the city’s construction pipeline flowing through a difficult environment where the pressures of high interest rates, policy uncertainty and elevated construction costs have forced professionals to take on lower-risk plans.
TRD analyzed initial major alteration permits issued by the Department of Buildings between March 1, 2025 and March 1, 2026, comparing proposed dwelling-unit counts against building’s existing residential-units.
Manhattan accounted for more than 8,400 proposed, additional dwelling units tied to major alteration permits, according to an analysis by The Real Deal. Brooklyn, in contrast, led the city in volume with over 300 major alteration permits filed under the same criteria.
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The divide becomes especially stark when looking at project size.
Manhattan had the most estimated residential units added per permit with 52. The Financial District saw concentrated mega developments and accounted for more than 3,200 proposed dwelling units with 360 units per permit.
Midtown enclaves the Garment District and the Upper West Side rounded out Manhattan’s most active neighborhoods with 209 and 136 proposed units, respectively.
Eli Weiss, principal at Joy Construction, credited growth in these neighborhoods to policies like the 467-m tax abatement, which provides exemptions for converting obsolete commercial buildings into residential units.
“Combine that with Class B and C office valuations plummeting and you have the recipe for a tremendous amount of production,” said Weiss.
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The rise in conversions comes as ground-up construction has become increasingly difficult.
General contractors and architects spent much of the past year battling threats of tariffs that would tax imports on construction materials and City Hall policies like the 485x tax abatement, which implemented a wage requirement on large housing developments.
Stubborn inflation also caused a slowdown in new building activity across the five boroughs compared to the year prior.
As financing conditions tightened and ground-up construction slowed, conversions provided a better redevelopment strategy for builders, helping sustain construction and activity across the city.
FiDi has seen one of the most active live-work transformations across the city. Prominent office to residential conversions at buildings 111 Wall Street, 77 Water Street and 55 Broad Street are projected to add thousands of residential units to the neighborhood.
For an area that has long had an oversupply of commercial real estate, “downtown conversions are still a key driver to help offset a surplus,” said Collier’s Executive Managing Director of Research & Business Development, Frank Wallach.
Brooklyn, however, is taking a more incremental approach to redevelopment.
Rather than blockbuster office conversions, the borough’s activity is being driven by smaller residential additions and expansions spread across dozens of neighborhoods.
Four of the top five neighborhoods with the most major alteration permits are in Brooklyn with Borough Park leading at 26 permits.
Despite those permits adding under 100 dwelling units total, the neighborhood is a central location for expanding smaller residential homes.
Weiss stated that adding every bit of supply to Brooklyn’s residential landscape helps.
“Maybe we can’t build a 400-unit in this neighborhood because it’s residential single-family or two-family homes, but at least we’re getting another 30 units as opposed to zero.”