Midtown Manhattan, the very heart of New York City, has recently been the center of attention for all the wrong reasons.
As one of Gotham’s largest office-to-residential construction conversion projects, the former world headquarters of Pfizer Pharmaceuticals was found to be dangerously unstable, shutting down traffic and interrupting business along one of the nation’s busiest commercial corridors.
The fallout from this event will likely not be limited to a single developer, contractor, or project. Rather, the impact will presumably reverberate throughout the industry responsible for underwriting the risks associated with this major economic activity. Insurers must now absorb and digest the forensic lessons to be learned from this event, and restructure how they treat office-to-residential construction conversion projects going forward.
Office-to-residential projects have become a flagship of New York City and other metro areas around the country to increase much-needed housing supply.
New York is a city of skyscrapers, and when stately, historic pre-war buildings fall out of favor, you can’t just scrap them. Instead, you reinvent them for more modern usage–and that means residential conversion.
Take the Wall Street area in Lower Manhattan. What was once a daytime hive of financial industry activity has transitioned into a thriving 24/7 neighborhood. Once gracious office towers that were home to major commercial and industrial powerhouses are now home to over 80,000 people.
Conversions Gaining Momentum
In 2025 alone, roughly five million square feet of New York City office space was converted to residential use, five times (5x) the number in 2022 and the highest such number in two decades.
The number of office-to-residential conversions planned for New York City in 2026 is double that of its closest competitor, Washington, D.C.
This particular conversion in Midtown Manhattan required complicated structural reinforcement work, as 11 floors were being added to the former office tower’s existing 22 floors. On the morning of July 7, 2026, a member of Steamfitters Local 638 noticed buckling support columns, leading to an evacuation of the building and the surrounding 12 city blocks.
Inside, the 21st floor up to the 26th floor–much of the addition on top of the original circa-1960 structure–experienced a partial collapse due to the new weight exerted on them. For 24 hours, emergency construction and engineering crews labored to reinforce and stabilize the structure.
A month later, the project remains paused, while parts of busy East 42nd Street, just blocks from Grand Central Terminal and the United Nations headquarters, were shuttered to pedestrians for much of the month of July. That means restaurants and stores could not open for business, nearby office buildings could not be occupied, and neighboring hotels were required to rebook guests into alternative lodgings at the last minute.
The fallout has not stopped there. Since this construction project made the wrong type of headlines, the City of New York has issued 18 partial and one complete stop-work order to other office-to-residential conversion projects, after inspectors, on the lookout to spot potential hazards, found safety violations at 19 different worksites across the city.
The aftermath of these events, and the growing prevalence of adaptive reuse projects that are far more complex than either new constructions or renovations, must undoubtedly result in greater scrutiny from insurers, just as it had caused for the city’s engineering and building inspectors.
This brings about a serious need for industry to come together to address the unique underwriting, and potential litigation risks inherent in this booming sector of office to residential building conversations.
‘Insurers must now absorb and digest the forensic lessons to be learned from this event, and restructure how they treat office-to-residential construction conversion projects going forward.’
Building Codes
For starters, the building and fire codes for an office building are very different from any residential one, affecting everything from windows, ventilation, and entry and egress. Adding over a dozen floors certainly brings greater complexity to that process.
Currently, one of the factors being scrutinized as a potential cause of the building’s instability is what the developer called a “scoop and stack” method of construction, which effectively removes sections of a building’s lower floors and relocates them to the upper levels.
Modern building codes require any bedrooms to have at least one window to be habitable. That means interior space at the center of these office buildings, often where office lobbies would be located, requires removal to create lightwells.
While this is a common practice to accommodate renovations necessary to add bedrooms to an office building, this can also add risk to already complicated projects in older buildings.
Increased scrutiny in the early stages may have led to an alternative method being proposed, or for reinforcements to be added to prevent the buckling.
This episode emphasizes the importance of insurance underwriters conducting independent structural engineering reviews before agreeing to any binding coverage policies. Given the challenges of adaptive reuse projects, it is also advisable to require continuous risk assessments and engineering reviews to ensure that things are progressing smoothly.
It is not just the structural integrity of the completed project that matters but the intermediary stages, as well.
The Pfizer Building incident, and others like it, also underscores the need to preserve the chain of evidence. Even mundane construction projects in New York City involve a tangled web of contractors, subcontractors, and risk. This project was a massive undertaking, with a $720 million construction loan.
Investigations and lawsuits will stem from this project, likely for years to come, and trace every piece of paperwork to find the parties at fault.
Furthermore, the destabilization and near collapse of a major Midtown skyscraper forces insurers to re-examine the issue of liability.
Multiple city blocks and dozens of businesses were forced to evacuate, incurring significant costs as a result. A nearby restaurant estimated it lost $300,000 due to its temporary closure, and is considering a lawsuit against the project’s lead developer, MetroLoft–and that is just one of over 100 businesses that were negatively impacted by the closures.
Construction projects in major metro areas–be that New York City, Boston, Chicago, Dallas, or San Francisco–are already complicated beasts, and adaptive reuse projects even more so. Insurers cannot forget these facts and must increase their due diligence accordingly. For these projects, design and execution are paramount, as a single flaw in either can cause untold damage.
Coffey, founding partner of insurance litigation firm Coffey Modica LLP, is a veteran litigator handling major claims and disasters up to $250 million. An ABOTA attorney, Coffey has counseled on major building and scaffold collapses on behalf of property owners and insurers and previously served for six years as fire commissioner of the City of Norwalk, Connecticut.
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