Vacant ground-floor commercial space is piling up across downtown Albany, Troy, and Schenectady. According to Brian Brosen, Licensed Associate Broker and Founding Partner of The Capital Team at eXp Realty, the biggest obstacle is not financing or zoning. It is that property owners have not accepted what their commercial space is actually worth.
As upstate New York cities push toward residential conversion of underutilized buildings, Brosen argues that a gap between owner expectations and market reality is slowing deals, frustrating investors, and leaving valuable urban real estate idle.
Commercial Rents Lag Market Reality
Brosen is active in both residential and commercial real estate across the Capital District. He describes the ground-floor commercial market in upstate New York’s urban cores as having softened significantly since the pandemic, without a corresponding adjustment in how owners price their space.
Mixed-use buildings, defined as properties with residential units above and retail or office space at street level, have become difficult to transact. The two components are now valued very differently. The residential portion is in high demand. The commercial portion often is not.
That disconnect creates a valuation problem that neither buyers nor sellers can easily resolve. Buyers underwrite deals based on realistic commercial rents. Sellers price based on what they previously collected or what they believe the space should command. Brosen says owners still expect around $22 per square foot for ground-level commercial space, a figure the current market does not support. That expectation gap, he argues, is one of the most common deal-killers in the Albany market right now.
Conversion Deals Face New Barriers
The market’s response to vacant commercial space has increasingly been to eliminate it. Brosen points to several large office buildings in Albany slated for full conversion to apartments, and he notes that property owners across the region are applying for zoning changes to shift commercial designations to residential use.
State-level support is reinforcing this direction. Albany recently received a $425 million development incentive from New York State targeting housing and downtown redevelopment, which Brosen says has generated genuine energy in the market. “The real push is for residential right now,” he says.
Conversion is not simple. It requires navigating zoning approvals, managing construction costs, and in many cases, fundamentally reimagining how a building functions. For smaller investors, including independent landlords and contractor-investors historically active in upstate New York’s urban neighborhoods, the complexity and capital requirements of conversion deals are increasingly out of reach.
Brosen describes a widening competitive gap between these smaller players and larger developers who can absorb the time, legal costs, and construction risk that conversions demand. “The average contractor driving around looking for a for-sale sign is just not able to compete,” he says.
Institutional Buyers Reshape Competition
That growing complexity is attracting a different kind of buyer. Upstate New York has historically been insulated from the institutional and corporate real estate buying that has reshaped markets in Texas, Arizona, and California. That insulation is eroding, most visibly in urban core markets where conversion opportunities are concentrated.
“Corporate buying of real estate has not been a huge thing here in upstate New York, but we’ve started to see it in the last couple of years,” Brosen says. Larger investors and development entities are increasingly identifying Albany, Troy, and Schenectady as markets where state incentives, relatively low acquisition costs, and strong residential demand create attractive conversion economics.
For independent investors, this creates a compounding problem. Mixed-use properties are harder to underwrite because of commercial vacancy and inflated owner pricing expectations, and competition for the best conversion candidates is intensifying. Buildings in strong locations with clear zoning paths are increasingly going to buyers with deeper pockets and more experienced deal teams. Brosen notes that fringe neighborhoods surrounding downtown cores may still offer accessible entry points for smaller investors before institutional capital fully saturates those areas.
Local Expertise Drives Better Deals
Understanding the Albany market requires more than access to data. Zoning histories, neighborhood trajectories, and owner psychology vary significantly from block to block, and that ground-level intelligence is what separates investors who close deals from those who do not.
Knowing which commercial spaces have realistic conversion paths, and which owners are genuinely motivated rather than simply testing the market, requires the kind of local knowledge that data platforms alone cannot provide.
Experienced local brokers point to the state development incentive and active rezoning activity as signals that the conversion trend has institutional backing. The caution, however, is that the opportunity is not uniform. Investors who arrive expecting straightforward acquisitions may find the Albany market more complicated than anticipated.
About the Expert: Brian Brosen is a Licensed Associate Broker and Founding Partner of The Capital Team at eXp Realty, based in the Capital District of New York, covering Albany, Troy, and Schenectady. He has more than two decades of experience across residential, commercial, and mixed-use property types in upstate New York’s urban core markets.
This article is intended for informational purposes only and does not constitute legal, financial, or investment advice. The views and opinions expressed herein reflect those of the individuals quoted and do not represent an endorsement of any company, product, or service mentioned. Readers should conduct their own due diligence and consult qualified professionals before making any investment decisions.
