How is Return to Office Impacting the Residential Real Estate Market?

The Weekly Recap

Good morning and happy Friday from the campus of Harvard Business School in Cambridge! Mortgage rates continue to decrease and have hit their lowest level in months, Andrew Cuomo is picking up steam in his candidacy for NYC Mayor and NYC continues to be the #1 preferred destination for college graduates. Central Park is working on fixing traffic for the loop, wealth creation is booming. We might as well call it the BlackRock Canal as the asset management company has taken a controlling stake in ports at the Panama Canal, players on the New York Yankees can now have beards and Citibank almost gave someone $81 Trillion into their account by fat fingering some numbers.

If you missed last weeks newsletter How to be Prepared When Submitting an Offer for Rent or Purchase, you can read that through the link.

How Is Return to Office Impacting the Residential Real Estate Market?

The return to office movement is having a significant moment on the residential real estate market, particularly in major urban centers like New York City. As more companies enforce hybrid or full-time office returns, demand for housing in city centers has surged, driving up both rental and purchase prices in key neighborhoods. While the pandemic led many to prioritize larger homes in suburban areas, the renewed need for proximity to the office is shifting buyer and renter priorities back toward convenience, transit accessibility, and in-building amenities.

At the same time, suburban markets that experienced unprecedented growth during the remote work boom are now seeing some adjustments. While luxury and second-home demand remain strong, many homeowners are opting to keep these properties as weekend or seasonal retreats rather than primary residences. The return-to-office push has also affected inventory and pricing across the board. In urban rental markets, limited supply and strong demand continue to drive high rents, particularly in cities like New York, where prices remain near historic peaks. Meanwhile, the for-sale market is benefiting from the resurgence of office workers, though inventory constraints and interest rates remain key factors in shaping pricing trends.

Despite the push for in-office work, hybrid models have created a middle ground, allowing buyers and renters to balance urban access with the need for additional space. As a result, demand remains strong in nearby commuter-friendly suburbs and in city buildings that offer flexible workspaces.

As return to office is restoring demand in urban areas and reshaping home preferences Office-to-residential conversions are reaching unprecedented levels as the new year unfolds. A recent RentCafe report reveals that a record 70,700 apartment units are expected to be delivered in 2025 through office conversions.

These transformed buildings now account for nearly 42% of the 169,000 apartments created through adaptive reuse projects. This trend underscores how office-to-residential conversions continue to serve as a viable solution to the evolving needs of the post-pandemic workplace.

The New York metro area leads the way with 8,310 office units set to be transformed into apartments. As a result, Washington, D.C., now ranks second with 6,533 future apartments to be converted after leading last year. It’s followed by Los Angeles in third place with 4,388 upcoming conversions, marking an impressive 80% increase from last year.

Big urban hubs like Chicago, Dallas and Atlanta are also following the national trend and embracing office-to-apartment conversions.

Market Performance

Here are how some other indexes and asset classes have performed as of this morning’s opening bell.

NYC Market Update

Here is a view of new inventory that has come onto the NYC market over the past WEEK as well as newly signed contracts in Manhattan.

Mortgage Rate Update

Mortgage rates saw their largest weekly decline since mid-September this week. The decline in rates increases prospective homebuyer's’ purchasing power and should provide a strong incentive to make a move. The decline in rates has also given some existing homeowners the opportunity to refinance. Applications for mortgage refinancing were up almost 44% this week, the highest since mid-December.

News You Can Use

• NYC is Still Attracting the Most College Grads of Any City in America- By Far NY Post

• Federal Reserve’s Preferred Inflation Metric Slowed in January Axios

• Wealth Creation is Booming as Multimillionaire Population Increases by 5.2% in the US CNBC

• Cuomo Wins Backers from Blankfein to Langone for NYC Mayor Bloomberg

• NYSE President Martin Sees ‘More Normal’ IPO Market in 2025 Bloomberg

• Morgan Stanley Dealmaker Michael Grimes Expected to Lead the New US Sovereign Wealth Fund CNBC

• US Consumer Spending Posts First Drops in Almost two Years Reuters

• Citigroup Erroneously Credited Client Account with $81 Trillion in ‘Near Miss’ Financial Times

• BlackRock Is Buying A Controlling Stake in the Panama Canal Bloomberg

• The IRS is Drafting Plans to Cut as Much as Half of it’s 90,000 Person Workforce Associated Press

• NYC to Overhaul Central Park Loop to Limit Conflicts Between Bikers, Walkers and Runners Gothamist

• Private Credit Paychecks Jump as Asset-Based Lending Expands Bloomberg

• The Yankees Allowing Beards Is About Way More than Facial Hair Bloomberg

The Deep Insight

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