Upstate New York Market Update: June 2026
By Ryan McGuire – Analyst
Undervalued Office Assets Are Becoming Upstate New York’s Next Housing Play
A 415,000-square-foot office complex in downtown Albany recently sold for $10.1 million, equating to less than $25 per square foot. The buyer plans to convert the property into apartments.
That transaction is not a one-off. Across Albany, Rochester, and Buffalo, office buildings are trading at dramatically reduced values and being repositioned as housing. The drivers are straightforward: office demand has not returned to pre-2020 levels in most Upstate markets, and housing supply has not kept pace with demand in many Upstate communities. Together, those conditions are pushing adaptive reuse from a niche strategy into something that looks more like a market norm.
What’s Driving This
Office vacancy in select Upstate submarkets has exceeded 20% and stayed there. Unlike Manhattan, where some sectors have absorbed space as firms consolidate, Upstate markets lack the tenant depth to absorb buildings of this size through traditional leasing. When the owner of a 400,000-square-foot tower loses an anchor tenant, the math for conventional office re-leasing often does not work.
Housing is the mirror image of that problem. The New York State Comptroller has documented a persistent gap between housing demand and supply across Upstate communities. Construction costs have kept new development constrained, while rents have risen faster than incomes in several markets. As a result, a developer that can acquire an office building at $20 to $30 per square foot and convert it to rental apartments is often working with a cost basis that makes the pro forma work when ground-up development would not.
New York State has begun responding to both sides of this equation. Legislators recently introduced a bill that would create tax incentives for office-to-residential conversions outside New York City, citing office vacancy and housing undersupply as linked concerns. How that legislation moves through Albany will matter for deal economics over the next few years.
Three Deals Worth Watching
Albany: Omni Plaza
The Omni Plaza transaction closed in June 2026. The 415,000-square-foot complex sold for $10.1 million, with the buyer planning to convert a substantial portion of the property to market-rate apartments and reposition the remaining office floors. At that per-square-foot basis, the acquisition cost alone gives the developer considerable flexibility on the conversion budget. Whether the project delivers on that premise will be closely watched by the market.
Rochester: Gateway Apartments
Construction recently broke ground on Gateway Apartments, a $72 million project converting a long-vacant office building on East Main Street into 129 mixed-income units. New York State Homes and Community Renewal is involved, and state officials have pointed to the project as a template for downtown office reuse. The involvement of state housing agencies typically brings subsidy stacking that can meaningfully change debt coverage ratios, which is relevant to how lenders underwrite the permanent financing.
Buffalo: 10 Fountain Plaza
Developers have released plans to convert 10 Fountain Plaza, the former Bank of America tower, into approximately 180 market-rate apartments. If it closes and gets built, it would be among the larger office conversions Western New York has seen. Lenders will pay attention to how the project is capitalized and whether it establishes a repeatable model for similar assets in the market.
What This Means for Borrowers and Lenders
Office-to-residential conversion is not a simple transaction type. The feasibility challenges are real. Buildings with deep floor plates can produce interior units without natural light. Mechanical systems designed for commercial use often require complete replacement. Structural modifications to add plumbing chases to every floor add cost and time. Contingency budgets on conversion projects consistently run higher than on ground-up construction because working within an existing structure creates more unknowns.
The debt markets are adjusting to this deal type, but not uniformly. Life company lenders, which have historically passed on conversion projects, are beginning to engage on stabilized mixed-income assets where a state subsidy stack reduces credit risk and the permanent loan is well-supported by in-place cash flow. Bridge lenders and CDFIs have been more active in the construction and lease-up phases, particularly on deals with Low-Income Housing Tax Credits or Historic Tax Credits in the capital stack. Those two credit programs change the financing structure significantly, and a mortgage banker who does not understand how they interact with senior debt is not much help to a borrower trying to close.
We have also seen increased lender interest in the portion of a conversion that remains commercial. In projects like Omni Plaza, where the owner is retaining office space alongside the residential conversion, the question of how lenders view that mixed-use income stream matters. Some will underwrite it; others will not. Knowing who will engage before a borrower spends six months in due diligence is part of the value of the relationship work we do at Largo Capital.
We are actively working with borrowers and lenders in this space. If you are evaluating an adaptive reuse opportunity in any market we serve, we welcome an early conversation. Getting the debt structure right before you have a site under contract is considerably easier than doing it after.
