New York City, the biggest U.S. commercial real estate market, signaled it's looking to accelerate an effort to shift office-heavy neighborhoods toward residential space in a move that points to a potential transformation of major American cities as a result of the pandemic.

As New York’s economic epicenter struggles to regain its pre-pandemic bustle, plans are proceeding to begin converting offices in midtown Manhattan into residential space. Mayor Eric Adams gave a sense of increased urgency to the issue by saying he is working on a strategy to create housing in parts of the neighborhood zoned to only allow manufacturing and office uses. It's a move that reflects both the property fallout from the health crisis and Adams' pivot to focusing on New York's housing scarcity.

"Councilmembers Erik Bottcher and Keith Powers have called on us to help make Manhattan a true work-live community," Adams said in his second annual State of the City address outlining his goals for the coming year. "They’re not saying ‘not in my back yard,’ they’re saying build in my back yard."

New York's standing in the commercial real estate industry often makes it a barometer for real estate activity in cities across the country, and that could be the case here as well. Other major downtown markets such as Chicago, Philadelphia, San Francisco and Washington, D.C., are seeing record-high office vacancy rates. In D.C., the mayor announced a goal this month to add 7 million square feet of residential space to the city’s office-laden downtown, at least some of which will likely be conversions, to bring people back to help local restaurants, stores and other businesses.

New York's office vacancy rate sits at 12.6%, up from about 8% before the pandemic, according to CoStar data. Due to an uptick in remote work, many employers have moved into smaller, higher-class office spaces. In New York, about 46% of the workforce is going into the office, according to keycard swipe data from managed security firm Kastle Systems.

In December, the New York City Council established a task force to study the feasibility of office conversions. While the committee has two years to come up with recommendations, the pace may move faster, thanks to Adams' team.

Along with the support of Bottcher and Powers — a rare and early vote of confidence — he appointed Dan Garodnick as executive director of the Department of City Planning last week. Garodnick was a lead staff member during another rezoning in midtown Manhattan, giving him some familiarity with such land use changes.

Garodnick helped pass the rezoning of Midtown East in 2017, legislation that opened the neighborhood up to increased office development. A stark symbol of the pandemic's rapid effect on New York real estate, the City Council approved the rezoning less than six years ago, allowing for the development of 6.8 million square feet of new office space and modernization of another 6.6 million square feet into Class A office space.

The 2017 rezoning spurred the construction of SL Green Realty's 93-story One Vanderbilt tower and the 70-story 270 Park Ave., which is set to become JPMorgan Chase’s headquarters.

The push to add more residential units to Manhattan is part of Adams’ larger shift to focus more on housing in his second year as mayor.

In his speech, he said he is working on a “moonshot goal” to add 500,000 more homes across the five boroughs in an effort to deal with an acute housing shortage in the city. His other main topics of focus were jobs, safety and healthcare.

This wouldn’t be the first plan of its kind in Manhattan. In the 1990s, officials implemented a property tax incentive plan to encourage office-to-residential conversions in lower Manhattan, where office vacancies were particularly high.

The incentive was used to convert more than 13 million square feet of office space into residential use from 1995 to 2006, according to the Citizens Budget Commission of New York.

In D.C., Mayor Muriel Bowser’s plan orbits around population growth, which has slowed during the pandemic after about a decade of rapid growth in the 2010s. The city’s population is at about 671,000, down from almost 690,000 in 2020, according to the U.S. Census Bureau. One of Bowser’s goals is to bump the population up to 725,000 by 2028, which would be the highest it’s been since the 1970s.

A major part of this population increase will lie in her promise to bring 15,000 residents to downtown D.C., an idea she first floated in her swearing-in speech and included in her list of six goals that make up what's known as her "Comeback Plan."

The mayor later clarified that she would achieve the downtown benchmark by adding 7 million square feet of residential units downtown. This would most likely involve office conversions, as the central business district has struggled over the past two years with office vacancies due to remote-work policies.

Bowser has also called on the federal government to assist in either bringing federal workers back into the office full time or ceding underutilized office buildings to become housing.

Other U.S. cities also are trying to figure out how to encourage the conversion of older office buildings to apartments.

Chicago, for example, plans to launch a financial incentives program to simultaneously address two big real estate challenges: high office vacancy in the city’s core and a dearth of apartments with below-market rents.