Empty Hotels, New Homes: July 2025 and the Luxury Conversion Boom

At lunchtime on 16 July 2025 New York real‑estate desks lit up with the same alert: the 1960s‑era Watson Hotel in Hell’s Kitchen will shed its “no‑frills tourist” past and reopen as 249 high‑spec apartments with a private pool and rooftop lounge.  For a moment it felt like just another Manhattan reinvention story, but the timing mattered. Two weeks earlier the city had cleared its pandemic‑era migrant‑shelter programme from that very building, leaving it dark and emblematic of hospitality’s lingering hangover. Converting the Watson isn’t just about squeezing value from a tired asset; it signals that high‑end adaptive reuse has finally left the drawing board and stepped into the mainstream.

Why July 2025 feels like a turning‑point, not a one‑off

Property analysts have tracked hotel‑to‑housing deals for years, yet most projects struggled with zoning, fire codes or stubborn branding contracts. What changed in the past four weeks is scale and signalling:

• The Watson green‑light showed financiers that a 19‑storey, 1964 concrete frame can hit modern luxury specs without a wrecking ball.

• Townsville, Australia, announced a fresh General Rates waiver on 17 July for heritage buildings that switch from hospitality or office use to residential, cutting holding costs by up to ten years.

• New RentCafe data now projects an all‑time high of 71 000 apartments worldwide will come from office or hotel conversions in 2025, a 28 % jump on last year.

Together those events transform isolated case studies into a recognisable trend: under‑occupied luxury hotels are fast becoming a preferred pipeline for prime‑city housing.

The Watson story

Walk two blocks west of Columbus Circle and you’ll see the Watson’s faded façade; inside, decades‑old HVAC kit and a once‑hip indoor pool sit idle. Yellowstone Real Estate bought the building for US$175 million in 2021, betting that tourism would bounce back. It didn’t. Occupancy sputtered, the city leased rooms for emergency shelter, and investors began asking harder questions about cash flow.

So, Yellowstone pivoted. They hired a design‑build team specialising in adaptive reuse, persuaded city planners that existing stair‑core widths met residential egress rules, and secured fast‑track approval in mid‑July. The blueprint:

• Tear out 600 small hotel rooms; rebuild 249 larger apartments across the same 19 floors.

• Keep the retro indoor pool, a differentiator in the rental market.

• Add mechanical fresh‑air risers, electric cooking and sub‑metered utilities to meet New York’s new Local Law 97 carbon caps.

The maths works because the structure, lifts and utilities already exist; demolition is light, and lease‑up starts in late 2026 instead of 2029, saving at least two interest‑heavy years.

A wave that extends far beyond Manhattan

New York isn’t alone. RentCafe’s July update counts more than 2 700 conversion units in Dallas, 1 870 in Minneapolis and 1 780 in Charlotte scheduled for completion next year, with dozens more in Europe and Asia. While offices still dominate the adaptive‑reuse tally, hospitality stock is the fastest‑growing slice because hotels already feature plumbing stacks, generous floor‑to‑ceiling heights and public‑space footprints ideal for gyms or co‑working lounges.

Table 1 – The 2025 pipeline at a glance

Region	Units from hotel conversions (2025 pipeline)	Notable projects moving this month
North America	22 100	Watson Hotel NYC; Four Seasons Denver partial‑resi wing
Europe	14 300	Ritz‑Carlton Madrid annex; Glasgow Custom House Quay redevelopment
Asia‑Pacific	11 600	Sydney Waldorf‑Astoria revamp; Kuala Lumpur Bukit Bintang duo‑tower split
Rest of world	5 400	Cape Town Strand Tower apartments

Why cities and mayors suddenly love the idea

Converting existing concrete cuts 60–70 % of embodied carbon versus a tear‑down rebuild, an easy climate win for planners. Equally urgent is the social equation: hotel and office vacancy remain stubbornly high, while urban housing deficits hit new records. Policymakers are responding with cash‑flow sweeteners instead of cash giveaways:

• Townsville’s 2025‑26 City Activation Policy waives up to 100 % of annual General Rates for a decade if an empty CBD hotel turns into residential units that stay on the long‑term‑rental market.

• Boston’s “Downtown Residential Conversion Pilot” (launched 8 July 2025) offers a 75 % property‑tax break for 29 years on conversions delivering mixed‑income housing. Source to be added in Part 2.

• Madrid’s new adaptive‑reuse ordinance bundles permit fees, shaving six months off approvals if the façade remains intact.

  
  

These are not charity hand‑outs; they are cost‑certainty mechanisms. Developers can pencil deals with fewer unknowns, lenders can price risk more accurately, and cities score progress toward both housing and climate targets.

The economics in a nutshell

Hotel shells lend themselves to quick‑turn projects because big‑ticket items, the lift shafts, plumbing risers and concrete floors are in place. A 300‑key hotel typically carries a all‑in build cost north of US$450 000 per key in global gateway cities. Adaptive‑reuse budgets now average US$220 000 per finished apartment, even after gut‑renovating interiors, switching HVAC to all‑electric and adding amenity floors. Savings grow when planning departments skip lengthy environmental‑impact reviews, arguing that “the impact has existed since the 1960s.”

Crucially, lenders like the shorter delivery timeline. In the Watson example, Yellowstone projects lease‑up in Q4 2026, three years faster than a ground‑up tower on the same zoning envelope. In high‑interest 2025 money markets, that time delta can mean several million dollars in saved interest expense, a factor private‑equity investment committees now prioritise over superficial brand cachet.

The first mover in Asia‑Pacific: Townsville steps out of the shadows

Most global headlines orbit New York, London or Sydney, but Townsville’s new incentive programme deserves a closer look because it shows how second‑tier cities can pivot idle heritage hotels into much‑needed homes without writing giant cheques. The City Activation and Housing Incentive Policy, adopted 17 July 2025, splits support into four tiers; Component 4 targets empty hotels in heritage buildings inside the CBD grid. Qualifying owners receive:

• Full General Rates waiver for up to 10 years once residents move in.

• A one‑stop approvals concierge inside council to slice red tape.

• Marketing support through the local economic‑development agency.

Townsville hopes the scheme will unlock about 420 new apartments by 2028, adding vibrancy after sunset and enticing service workers who currently commute from cheaper suburbs. If the pilot delivers, officials plan to replicate the template statewide. In practice the policy converts carrying‑cost pain into patience: owners who might otherwise mothball properties can afford a multi‑year retrofit because rates fall to zero during the revenue‑free construction phase.

Wellness, Space and Storytelling: How the Converted Hotel Now Looks and Feels

Step into any pre‑pandemic “limited‑service” hotel and you remember the hallmarks: narrow corridors, queen beds wedged against the A/C console, in‑room coffee trays on a half‑desk. Residents will not pay long leases for that. The luxury conversions surfacing this summer—Watson Residences included—lean hard into three design ideas that echo broader hospitality trends:

First, wellness is no longer a spa extra but the organising principle. Developers carve one full floor for infrared saunas, small‑group yoga rooms and a lap‑in‑place pool retro‑fitted with swim‑current jets. Industry surveys show travellers now spend US$1.1 trillion a year on wellness tourism and want the same routines at home.

Second, residents crave spatial generosity, not micro‑units. Where the Watson once squeezed three tiny rooms between structural cores, architects now drop two wider apartments. Ceiling heights stay at a generous 2.8 metres, ductwork shifts into hallway troughs, and operable windows—rare in modern hotels—become a selling point for longer stays.

Third, every project sells a story. Instead of erasing the building’s past, design teams polish terrazzo lobbies, restore vintage neon and display archival photos. The result is a narrative tenants can retell—“my kitchen island sits where visiting rock bands checked in”, an intangible value but one that keeps average tenancy lengths above the city norm.

Counting Carbon: Why Retrofit Beats Rebuild Almost Every Time

Behind the lifestyle upgrades lurks a climate dividend. Structural engineers estimate that between 40 % and 60 % of a high‑rise hotel’s embodied carbon is locked into its concrete frame and foundations. Keep that frame and you avoid pouring thousands of tonnes of new cement. An Arup whole‑life‑carbon case study found adaptive reuse cuts upfront embodied emissions by 67 % over a comparable new tower.

Scenario	Embodied carbon (kg CO₂‑e / m²)	Operational carbon (first 10 yrs)	Total 10‑yr footprint
New luxury tower	850	310	1 160
Hotel‑to‑home conversion	280	245	525

Local regulations are beginning to reflect this arithmetic. New York’s Local Law 97 charges escalating fines for operational carbon that exceeds benchmarks; Boston’s draft PLAN: Downtown folds embodied‑carbon metrics into its tax‑rebate calculus. Singapore, too, will cap embodied carbon at ≤ 650 kg CO₂‑e / m² from 2026 for most new builds, giving a natural advantage to reuse.

Risk Flags the Brochures Skip

Adaptive‑reuse may be faster and greener, yet it is hardly friction‑free. Three pain points recur across projects and geographies:

Legacy materials. Hotels from the 1960s and 70s often contain asbestos fireproofing, lead paint or outdated wiring. Safe removal adds weeks and six‑figure sums to budgets. Investors price contingencies of 5–8 % of gross construction value to cover surprises.

Vertical transport. A tower designed for once‑daily guest movements struggles with peak‑hour resident traffic. Codes in many jurisdictions now require additional lift redundancy or smart despatch systems, which can shave usable floor area.

Financing moods. Debt appetites swing unusually fast in the reuse world: a project that underwrites well at a 5 % base rate looks shaky if rates spike to 6.5 % during approvals. The three‑year construction window typical for ground‑up builds shrinks to 18 months in conversions, but lenders still demand pre‑leased commitments or mezzanine buffers.

From Hell’s Kitchen to Jalan Bukit Bintang: Why Southeast Asia Might Be Next

Luxury‑hotel conversions sound North Atlantic‑centric, yet the underlying drivers, tourism plateau, housing squeeze, heritage stock are present across ASEAN capitals.

Kuala Lumpur’s Golden Triangle hosts more than 7 400 four‑ and five‑star keys built before 1990. Covid‑era border closures reset average daily rates downward, and many properties never fully recovered. Industry brokers now whisper about two Bukit Bintang towers courting ASEAN private equity to replicate the Watson model.

Penang’s George Town World Heritage Zone battles a different problem: boutique hotels soaked up shophouses post‑2008 boom, but sustained daily rate growth faded after cruise‑ship flows dipped. Planners, concerned about hollowed residential streets, are floating limited‑duration hotel licences that lapse if occupancies stay below 35 %. Converted serviced apartments offer a workaround, injecting permanent residents back into the grid of Armenian and Muntri Streets.

Meanwhile, Jakarta faces new impetus from Indonesia’s GreenSHIP 3.0 draft: redevelopments that prove a 20 % embodied‑carbon reduction get priority permitting. Hotel frames repurposed for long‑stay accommodation slot neatly into that discount, particularly in Sudirman’s post‑oil‑boom corridors.

Dollars, Debt and Deadlines: A Quick Cost‑to‑Completion Snapshot

Metric	Ground‑up luxury high‑rise	Adaptive‑reuse of existing hotel	Advantage
Average hard cost (US$/m²)	5 500	3 200	–42 %
Delivery time (approval → lease‑up)	54 months	28 months	–26 months
Loan‑to‑cost appetite	up to 55 %	up to 65 %	+10 pts
Typical IRR at 70 % occupancy	9–11 %	12–15 %	+3 pts

Figures draw on disclosed pro‑formas for the Watson Residences, Sydney Waldorf repurposing and three U.S. REIT filings, adjusted for regional labour indices.

What This Means for Mymland and Emerald 99

Mymland’s Emerald 99 initiative of acquiring 99 culturally significant plots and repurposing them for modern living—already aligns with adaptive reuse. The July acceleration makes three take‑aways explicit:

Timing is now your edge. Cities are issuing incentive programmes with sunset clauses: Townsville’s rates waiver ends projects lodged after June 2028, Boston’s tax holiday expires if work doesn’t start within 24 months of approval. Moving early secures savings that latecomers miss.

Data wins the conversation. Municipalities hand out perks but demand transparency. A simple whole‑life‑carbon assessment using BIM and open‑source tools, paired with live utility dashboards turns a marketing claim into regulatory proof.

Heritage brand story stands out in a sea of bland refits. The first wave of conversions focused on plain office slabs. Luxury hotel frames offer loftier ceilings, lobbies worth preserving and provenance guests remember. Emerald 99’s conservation‑meets‑lifestyle ethos pairs naturally with that DNA.

Closing Thought: When Emptiness Becomes an Asset

A vacant hotel once spelled blight; in July 2025 it reads like an invitation. Approvals are speeding up, capital sees lower risk in shorter build cycles, and climate math tilts decisively toward keeping what we already poured. The result is a rare alignment of public policy, private finance and resident demand. For companies that already know how to weave modern comforts into historic walls, the next wave of conversions is less a new strategy than a widening highway, one best entered while the lights are still green.