We saw this happen in Soho – a run-down work area is transformed into a hip residential community. Of course, this happened after a long process involving penniless bohemians, urban gentrification, and soaring real estate prices. Could it happen again to recession-hit office cubicle blocks?

It just might – office vacancies are rising to 13 percent in Manhattan alone; pricey office towers are losing tenants fast, and older office buildings are facing a crunch they just might never pull out of.

In New York, ground zero for the recession is putting its toe in the residential water; the New York headquarters of the American International Group (AIG) at 70 Pine Street will undergo a transformation at the hands of developer Young Woo, who plans to split the building’s 66 stories between condos on the top floors and commercial establishments on the lower floors.           read more

Not everyone is gung-ho about remaking AIG’s erstwhile digs:

Real estate experts said that remodeling the towers—whether for retail, residential, hotel or redesigned commercial space—is risky.

“The economic opportunity to convert anything to luxury condos has passed,” said Jonathan Miller, CEO of Miller Samuel and author of popular housing market reports for Douglas Elliman. “New development in general is experiencing a very weak environment right now because of the recession, because of the credit contraction, and because developers haven’t been able to adapt to the new market.”

But colleagues said that if any developer can adapt to a new market, it’s Young Woo.

It remains to be seen how Young Woo will remake the former AIG offices; continuing job losses in the financial district will continue to shrink potential buyers, here and everywhere else.

Could Young Woo try going downmarket, appealing to the penniless bohemians who made Soho the cool place it is now (and priced themselves out of it in the process)? New York magazine asked a few design firms to come up with a bohemian remake of former cubicle farms (the slideshow is here for you to enjoy), and fanciful as the images might be, this could be the future of large swathes of the corporate landscape.