Pictured above: Rendering for the office-to-residential conversion of SoMa (25 Water Street).

In this week’s edition:

The Federal Reserve meets Tuesday to deliberate on interest rates amid mounting political pressure, shifting trade policy, and mixed economic signals. This decision comes in the same week that reports on GDP, employment & the Fed's price metrics are coming out as well. With new tariffs set to take effect next week, most expect the Fed to hold rates steady (for now) as they wait to see the full economic impact of tariffs.

While the Fed doesn’t set mortgage rates directly, rate cuts often push them lower, though it’s not always a one-to-one relationship.

The Fed cut rates three times in 2024: September, November, and December. The September move, a 0.5-point cut, was the first in over four years and brought mortgage rates down to 6.12% by October. But that relief was short-lived: mortgage rates climbed again in 2025, averaging between 6.7% and 6.9%.

The Fed has held off on cutting rates this year, partly because inflation is still running above target—and there's so much uncertainty around how new tariffs will affect prices. With the job market holding steady, there just hasn’t been much urgency to move. For now, the approach seems to be: wait & watch.

***

“Our clients are very wealthy . . . It’s the uncertainty that bothers them, it’s the mood that is not good. But I’m not going to sit here in anguish . . . I am going to be hopeful and focus on the things whose outcome I can affect.” 

- Brunello Cucinelli, whose profits are bound to drop because of US tariffs if consumers reject higher prices which they have raised in the double digits for several years.

For years, we’ve all known that vacant offices could (and should) become much-needed housing. But the financial math never quite worked—until recently. That changed with two major developments:

An empty office building in Lower Manhattan—once a maze of windowless cubicles & originally built for JPMorgan Chase in the 1960s —is poised to become the largest office-to-residential conversion in U.S. history. When complete, it will offer over 1,300 new rental apartments, including 300 designated as affordable housing. Architect is CetraRuddy.

But it won’t hold the record for long.

Next year, an even larger project is expected to break ground on East 42nd Street, bringing 1,600 rental units to a former office tower (previous headquarters of Pfizer.)

Between these two launches will be 5 Times Square, a landmark conversion that will add 1,250 new homes—right in the heart of 'the city that never sleeps.'

So finally, the long-talked-about wave of office-to-residential conversions in NYC is here.

Of course, the transformation isn’t just legal or financial—it’s deeply architectural. Converting deep, windowless office floor plates into livable, daylight-filled apartments demands serious ingenuity.

This is now the largest office-to-residential conversion in U.S. history, where developers are carving enormous courtyards into the building’s core to channel daylight deep into the structure, and stacking ten new steel-framed stories on top—each with oversized floor-to-ceiling windows to meet residential code and aspirations.

On the exterior, much of the building’s former brick skin is being replaced or painted white, giving way to a bright, modern glass-and-white palette that transforms both light penetration and street presence (The New York Times).

Gensler is leading the redesign of a nearly one-million-square-foot tower, removing large sections and reshaping the building to create more corner units and inject natural light and air throughout converted living spaces.

The plan will transform this 38-story building—previously vacated by Ernst & Young—into 1,250 market-rate and affordable homes as part of NYC’s larger “Manhattan Plan” to address housing shortages (New York YIMBY & Architecture Daily).

Skidmore, Owings & Merrill (SOM), a premier architecture & engineering firm, did a feasibility study that addresses the challenges of deep floor plates in older office towers. Their proposal is to shave back the building’s mass and add new terraces, courtyards, and light wells—drastically improving light and air flow for future residents and marking a significant shift from dense commercial use to vibrant residential community.

These aren’t cosmetic changes. They are complete structural reinventions—turning old office blocks built for cubicles and file cabinets into homes that feel open, modern, and unmistakably residential.

Saudi Arabia’s Public Investment Fund (PIF) is taking a two-thirds stake in a planned 1,200-foot tower one block from Central Park—a $1B+ project with Related Companies on the site of 625 Madison which would transform it into one of Manhattan’s most prominent new additions.

Related initially eyed a residential-hotel mix, but with demand for trophy office space rebounding, it’s now considering a shift to commercial. So far, PIF has put in $200M, with more expected as the plans evolve.

It’s a pivot for the Saudi fund, which has historically focused its real estate dollars on mega-projects at home. But recently, it’s been planting flags in marquee global assets: Selfridges (40% stake), Aman Hotels ($900M), Rocco Forte (49%), and now, a piece of Midtown’s skyline.

NYC’s market trends:

Even though the tower at 625 Madison may pivot toward office use, the surge in residential rents is part of the broader story. Both trends reflect renewed confidence in New York—among renters, employers, and global investors alike. Whether it’s trophy office space or prime rental apartments, the city’s most desirable real estate is commanding a premium again.

144 Contracts signed in June, 29 less than the prior month.

65 Contracts signed in July so far.

Luxury contracts ($4M+) were down in July compared to the same month in 2024, and lower than July averages over the past three years. While seasonality always plays a role, this year’s dip likely reflects broader economic uncertainty and the growing impact of shifting tariff policies, which continue to weigh on financial markets and buyer sentiment.

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