Isn't there a housing shortage? Rezone these buildings for apartments on the upper floors. Edit: Even if it costs a lot to convert (that is where tax incentives would usually help if done correctly). Having them sit empty costs more eventually.
Renovating commercial office space for residential use would be very expensive. Just re-plumbing alone would not be cheep. Probably cheaper than building a brand new building, but I don't know the numbers on that.
And unless it's a really cool old industrial building, you end up with crappy residential buildings that aren't tremendously desired unless the location is really, really good.