If you don't use the center of the building, then you only have room for one "ring" of residential units, whose windows face the exterior of the building. If you cut a donut hole down the center of the building, now you have room for two rings of units. Furthermore, in places like NYC, developers are allowed to "bank" the floorspace that comprised the donut hole and add new construction on top of the building so that overall square footage remains the same.