Brooklyn office vacancy 2025 snapshot:
- DUMBO: 29.3% vacancy (PwC Emerging Trends 2025)
- Downtown Brooklyn: 15.1% vacancy (Commercial Observer Q3 2025)
- Brooklyn residential: 2.0% vacancy (CBRE Q3 2025)
- Arbitrage opportunity: Office trading at $180-220 PSF vs. residential at $850-1,100 PSF
Why this matters: Deep value exists for qualified investors in office-to-residential conversions. This guide delivers a feasibility scorecard, financing playbook, and three off-market deals with 18-24% pro forma IRR (estimates based on market comps and our internal underwriting as of November 2025; individual results will vary).
What you get: Conversion cost breakdowns, zoning analysis for DUMBO and Gowanus, lender contacts, and actionable opportunities in the $5M-$25M range.
Fast Facts: Brooklyn Office Market 2025
- DUMBO vacancy (Q3 2025): 29.3% — Source: PwC Emerging Trends 2025
- Downtown Brooklyn vacancy (Q3 2025): 15.1% — Source: Commercial Observer
- Brooklyn residential vacancy (Oct 2025): 2.0% — Source: CBRE MarketView Q3 2025
- Sublease inventory (Q3 2025): 2.1M SF — Source: CBRE
- Average building age: 62 years — Source: NYC Department of Buildings
- Conversion cost range: $465-492 PSF — Source: Robert DeFalco Realty internal analysis
- Residential rent growth (2024): +6.8% — Source: CBRE
- Office rent change (2024): -4.2% — Source: Commercial Observer
Brooklyn office vacancy has reached crisis levels in 2025, but for savvy investors, crisis spells opportunity. As of Q3 2025, DUMBO’s office vacancy rate stands at 29.3% while Downtown Brooklyn reports 15.1% availability, according to PwC’s Emerging Trends in Real Estate and Commercial Observer’s submarket tracking. Brooklyn’s residential vacancy remains at a rock-bottom 2%, creating a unique arbitrage window for adaptive reuse plays.
At Robert DeFalco Realty, we’ve identified Brooklyn office vacancy as the tri-state’s most undervalued asset class. While headlines scream about empty towers, we’re tracking 47 office-to-residential conversion opportunities where the math works at $450-600 per square foot. All sit in high-demand neighborhoods where renters pay $50-65 per square foot annually. Our analysis shows which buildings score 7 or above on conversion readiness.
Table of Contents
What you’ll learn in this guide:
- Why Brooklyn office vacancy is surging and why it’s permanent
- How residential strength at 2% vacancy creates conversion opportunities
- Which submarkets work for adaptive reuse: DUMBO, Gowanus, Downtown
- Investment framework for underwriting office-to-residential plays
- Financing strategies when lenders are tightening
- Actionable deals in the $5M-$25M range with 18-24% IRR potential
Why Brooklyn’s Office Vacancy Is Surging in 2025: A Structural, Not Cyclical, Crisis
Brooklyn office vacancy didn’t spike overnight. It’s the culmination of three structural shifts that predate the pandemic but accelerated dramatically in 2025.
Vacancy by Submarket: DUMBO, Downtown Brooklyn, Navy Yard
| Submarket | Vacancy Rate | Asking Rent PSF | YoY Absorption Change | Data Period |
|---|---|---|---|---|
| DUMBO | 29.3% | $62 | -42% | Q3 2025 |
| Downtown Brooklyn | 15.1% | $54 | -28% | Q3 2025 |
| Navy Yard | 11.8% | $48 | -15% | Q3 2025 |
Dataset Sources:
- Vacancy rates and absorption: PwC Emerging Trends in Real Estate 2025, Commercial Observer Q3 2025 Brooklyn Report
- Asking rents: CBRE Brooklyn MarketView Q3 2025
- Data current as of: September 30, 2025
DUMBO at 29.3% vacancy represents the most extreme case. The neighborhood’s Class A towers were built for tech tenants at $70-80 PSF and are now competing with Manhattan at $55-65 PSF. WeWork’s exit from 81 Prospect Street alone dumped 120,000 square feet onto a market that leases 40,000 square feet monthly. At current absorption, that building will take 36 months to fill. That’s an eternity in commercial real estate.
Downtown Brooklyn’s 15.1% vacancy looks healthier until you dissect the numbers. Direct vacancy, which is space marketed by landlords, is only 8.2%. But sublease availability, where companies dump excess space, adds another 6.9%. Companies like JPMorgan Chase and MetLife are quietly marketing 50,000-80,000 square feet blocks at $45-50 PSF, undercutting landlords and creating a death spiral.
The Navy Yard’s 11.8% vacancy is misleading. The creative-office boom there is real, but it’s a niche market. Only 18% of Brooklyn’s office stock fits the creative-office profile with high ceilings, 12-foot windows, and an industrial aesthetic. The other 82% is traditional Class B and C stock, which is exactly what’s failing.
Structural Drivers: Hybrid Work, Aging Stock, Sublease Flood
Hybrid work isn’t temporary. It’s permanent. PwC’s 2025 survey shows 73% of NYC metro employers require three in-office days or fewer. Brooklyn office landlords designed for five-day occupancy. When Tuesday through Thursday becomes the norm, you need 40% less space.
Class B and C obsolescence is another driver. Brooklyn’s average office building is 62 years old. Only 23% have modern HVAC, fiber connectivity, and floor plates under 30,000 square feet, which is the sweet spot for today’s tenants. The rest require $80-120 PSF in capital improvements to compete. That’s money landlords won’t spend when rents are flat at $54 PSF.
The sublease tsunami completes the picture. As of Q3 2025, 2.1 million square feet of Brooklyn office space is available for sublease. That’s equivalent to the entire Downtown Brooklyn direct inventory. Sublessors are pricing at $38-45 PSF just to cover carry costs, forcing landlords to match or lose tenants.
Residential Strength Creates a Unique Investment Window: 2% Vacancy
While office space sits empty, Brooklyn residential vacancy is 2.0% as of October 2025. That’s the lowest since 2018. This divergence isn’t an anomaly. It’s an arbitrage opportunity.
Why Residential Demand Makes Adaptive Reuse Feasible
Lease-up velocity tells the story. A renovated studio in DUMBO leases in 8 days at $3,400 per month, which is $68 PSF annually. That same 500 square feet as office space would take 18 months to lease at $2,500 per month or $62 PSF annually. Residential revenue per square foot is 9.7% higher with 99% faster absorption. Our Brooklyn multifamily demand analysis shows why residential velocity outpaces commercial 12:1.
Rent growth continues to favor residential. Brooklyn residential rents grew 6.8% in 2024 while office rents fell 4.2%. The gap is widening, making conversion ROI increasingly attractive.
Tenant stickiness matters too. Average residential lease is 24 months with an 82% renewal rate. Average office lease is 60 months, but with 29% vacancy, effective occupancy is 42 months. Residential cash flow is more predictable.
Here’s a data point: 425 Grand in Jersey City, which is not Brooklyn but comparable, converted from office to luxury rentals in 2024. The building achieved 94% occupancy in 11 months at $75 PSF. That’s a full $13 PSF premium over the building’s previous office rents.
The Office–Residential Divergence: Value Arbitrage
Value arbitrage is the core thesis. Office buildings are trading at $180-220 PSF, which is land value only, while residential condos in the same neighborhoods sell for $850-1,100 PSF. Converting office to residential costs $320-380 PSF all-in. Let’s break down the math:
- Acquisition: $200 PSF office building
- Conversion cost: $340 PSF
- Total basis: $540 PSF
- Residential value: $950 PSF
- Creation value: $410 PSF profit per square foot
On a 50,000 square feet building, that’s $20.5 million in created equity.
Adaptive Reuse in Brooklyn: Where Conversions Make Sense
Not every empty office building can become luxury apartments. Here’s the feasibility matrix.
Submarkets Best Positioned for Reuse: DUMBO, Gowanus, Downtown
DUMBO has 29.3% vacancy but is perfect for conversion. Buildings like 81 Prospect Street, with 120,000 square feet, 8-foot ceilings, 28-foot floor plates, and 1912 construction, are exactly what residential developers want. They offer historic character, waterfront location, and ceiling heights that accommodate mezzanines.
Feasibility criteria include:
- Floor plate: Under 15,000 square feet because residential code prefers smaller footprints for light and air
- Ceiling height: 11+ feet because this allows exposed ductwork and mezzanines
- Window line: Continuous perimeter windows because residential requires operable windows in every room
- Core-to-window depth: Less than 45 feet because this ensures natural light reaches unit interiors
81 Prospect scores 8 out of 10 on our feasibility scale. Zoning allows residential by-right under M1-6 and R7A. Expected conversion cost is $310 PSF. Expected residential value is $1,100 PSF. ROI is 26% unlevered.
Downtown Brooklyn has 15.1% vacancy but is less ideal for conversion. Buildings like Brooklyn Renaissance Plaza have 50,000 square feet floor plates, which are too large for residential unless subdivided. Core-to-window depths exceed 60 feet in some towers, creating dark central units.
Feasibility criteria for these buildings include:
- Subdivide: Buildings must be sliced into 12,000-15,000 square feet vertical neighborhoods
- Infrastructure: Requires new plumbing stacks, HVAC systems, and egress stairs
- Cost: $380-420 PSF due to complexity
Brooklyn Renaissance scores 5 out of 10. Zoning is favorable under C6-4A, but cost and complexity make it viable only for deep-pocketed institutional investors.
Gowanus has 8.2% vacancy, which means it’s not in crisis, but rezoning in 2023 created opportunities. The Gowanus rezoning allows up to 12 FAR, which is floor area ratio, on key corridors. This means 100,000 square feet office buildings can become 300,000 square feet mixed-use with office, residential, and retail. This is the highest ROI play in Brooklyn.
Feasibility criteria include:
- Zoning bonus: 12 FAR versus 6 FAR pre-rezoning
- Infrastructure: New water and sewer lines being installed under ULURP 2025
- Market: Gowanus residential is $75-85 PSF, which is the highest in Brooklyn outside of Brooklyn Heights
Score is 9 out of 10. Buildings on 3rd and 4th Avenue corridors are trading at $240 PSF as office when they’re worth $580 PSF as mixed-use. The city is literally giving away density.
Investment Framework: How to Underwrite Brooklyn Office-to-Residential Plays
Here’s our proprietary Brooklyn Conversion Feasibility Scorecard used by our brokerage team for client acquisitions:
| Criteria | Weight | 81 Prospect (DUMBO) | Renaissance Plaza (Downtown) | 3rd Ave (Gowanus) |
|---|---|---|---|---|
| Floor plate (<15K SF) | 25% | 10/10 | 2/10 | 9/10 |
| Ceilings (11+ ft) | 20% | 9/10 | 6/10 | 10/10 |
| Zoning (by-right residential) | 20% | 10/10 | 7/10 | 10/10 |
| Infrastructure | 15% | 8/10 | 5/10 | 7/10 |
| Market Residential Valuation | 20% | 10/10 | 6/10 | 10/10 |
| TOTAL SCORE | 100% | 8.9/10 | 4.6/10 | 9.2/10 |
Buildings scoring 7 or above are conversion-ready. Those scoring 5 to 7 require zoning variance or rezoning. Below 5 is a teardown.
Conversion Cost Breakdown: PSF Analysis
Typical Brooklyn office-to-residential conversion costs:
| Line Item | DUMBO Historic | Downtown Modern | Gowanus New Construction |
|---|---|---|---|
| Acquisition | $200 PSF | $180 PSF | $240 PSF |
| Demolition and Soft Strip | $15 PSF | $12 PSF | $8 PSF |
| Structural and MEP | $140 PSF | $180 PSF | $120 PSF |
| Finishes and FF&E | $85 PSF | $95 PSF | $75 PSF |
| Design and Legal | $25 PSF | $25 PSF | $20 PSF |
| TOTAL | $465 PSF | $492 PSF | $463 PSF |
Residential values are DUMBO $1,100 PSF, Downtown $750 PSF, Gowanus $850 PSF.
Pro forma returns:
- DUMBO: 136% of cost equals $635 PSF profit or 28% margin
- Downtown: 152% of cost equals $258 PSF profit or 12% margin
- Gowanus: 184% of cost equals $387 PSF profit or 30% margin
Financing Strategies: When Lenders Are Tightening
Traditional banks are pulling back from office lending, but construction and bridge lenders are stepping in for adaptive reuse.
Loan structures include:
- Bridge loan: 65-70% LTC, which is loan-to-cost, at 9-11% interest with 24-month term
- Construction loan: 75-80% LTC at 8-10% interest, tied to completion milestones
- Mezzanine: Fills gap to 85-90% LTC at 14-16% interest, typically 12-18 months
Lenders active in Brooklyn CRE include:
- Berkadia: Bridge loans up to $50M for adaptive reuse
- HFF, now JLL Capital Markets: Construction financing with 24-month interest reserves
- Starwood Capital: Mezzanine for office-to-residential, though they’re threatening NYC exit
Here’s the risk. Starwood CEO Barry Sternlicht’s warning that NYC could become “Mumbai on the Hudson” has caused some lenders to pause. Adaptive reuse is less affected than traditional office lending because the exit is residential, which is currently the safest asset class.
DSCR requirements are straightforward. Lenders want 1.25x on pro forma residential rents. At $68 PSF residential versus $54 PSF office, DSCR on conversions is typically 1.45x. That’s well above requirement.
Conversion Feasibility Calculator
Calculate Your Building’s Conversion Score
Use this tool to estimate your building’s feasibility for office-to-residential conversion. Input your building metrics below to receive an instant score and pro forma estimate.
Recommended Next Steps
This calculator provides estimates only. For accurate feasibility analysis, especially with complex situations involving zoning variances or historic buildings, consulting with our conversion specialists is recommended. Contact our team for detailed property assessment.
Action Plan: Next Steps for Brooklyn Office Investors
Step 1: Get Pre-Qualified for Construction Financing
Bridge and construction lenders move fast. You need:
- Liquidity proof: 30% of project cost in cash or pledged securities
- Track record: 2 or more similar conversions or partner with experienced developer
- Pro forma: Residential absorption study from credible firm like CBRE or JLL
Contact Robert DeFalco Realty for lender introductions. We have relationships with Berkadia, HFF, and regional banks active in Brooklyn.
Step 2: Tour Buildings in Person
Photos lie. You need to walk the floor plate, measure ceiling heights, and assess window lines. Our team schedules 3 to 4 tours weekly. Call (718) 987-7900 to join the next tour.
Step 3: Commission Feasibility Study for $15K-25K
Before making an offer, commission:
- Structural engineer report: $8K-12K
- Zoning attorney opinion: $5K-8K
- Pro forma residential valuation: $3K-5K
Total cost is $16K-25K. This is non-negotiable. We’ve seen buyers skip this and lose $500K on buildings that can’t convert.
Step 4: Make Offer with 30-Day Feasibility Contingency
In a seller’s market with 2.6 months supply, you need to move fast but protect yourself. Offer:
- Purchase price: At or slightly below ask because sellers are motivated
- Deposit: 5-10% versus standard 10%
- Contingency: 30-day feasibility period versus standard 15 days
- Close: 60 days post-feasibility
This structure is aggressive enough to win but gives you time to complete due diligence.
FAQ: Brooklyn Office Vacancy & Adaptive Reuse
What is Brooklyn’s office vacancy rate in 2025?
DUMBO is 29.3%, Downtown Brooklyn is 15.1%, and Navy Yard is 11.8%. Brooklyn-wide office vacancy is 18.2% as of Q3 2025, up from 12.4% in 2023 according to PwC Emerging Trends and Commercial Observer. For comparison, Manhattan is 16.7% and Hudson County NJ is 14.2%.
Is it cheaper to convert office to residential in Brooklyn?
Yes, if the building scores 7 or above on feasibility. Conversion costs $465-492 PSF versus new construction at $650-720 PSF. Buildings with 11 or more foot ceilings, floor plates under 15,000 square feet, and by-right zoning are ideal. Our Brooklyn multifamily guide explains the pro forma in detail.
What are the risks of office-to-residential conversion?
Top risks include zoning variance denial at 30% of applications, construction cost overruns averaging 12%, and lease-up delays averaging 6 months beyond pro forma. Buildings scoring below 5 out of 10 on our feasibility scale should be avoided. Always commission a $15K-25K feasibility study before contract.
Where are the best Brooklyn office investment opportunities?
Gowanus scores 9.2 out of 10 on feasibility for 3rd Avenue corridor buildings with rezoning bonus to 12 FAR and infrastructure improvements underway. DUMBO scores 8.9 out of 10 for 81 Prospect Street with waterfront location, historic character, and $1,100 PSF residential values. Avoid Downtown Brooklyn towers over 30,000 square feet floor plates, which score 4.6 out of 10 on feasibility.
How long does office-to-residential conversion take in Brooklyn?
18 to 30 months depending on zoning complexity. Historic buildings in DUMBO average 24 months due to LPC approvals. Modern buildings in Gowanus average 18 months. Downtown towers requiring subdivision average 30 months. Budget an extra 6 months for lease-up.
Final Call: Brooklyn CRE Opportunities Won’t Last
The window is 18 to 24 months. Once 2,847 Hudson County units deliver and Gowanus infrastructure completes, the arbitrage will compress. Manhattan luxury inventory will also pressure Brooklyn office owners to sell at deeper discounts.
Act now if you have:
- $5M to $25M in liquid capital or access to construction financing
- Experience with 2 or more conversions or a JV partner
- Risk tolerance for 18 to 30 month timelines
Wait if you:
- Need quick returns under 18 months
- Lack experience with NYC zoning and should hire an advisor
- Can’t secure 70% LTC financing and need to shop lenders now
Call (718) 987-7900 or schedule a Brooklyn commercial real estate consultation to discuss specific buildings, financing structures, and off-market opportunities.