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20 housing markets with the most planned office-to-apartment conversions

The pipeline for converting office spaces into apartments has surged by 357% in just three years.

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Pandemic era adoption of work-from-home and hybrid work models has left many office spaces unused, triggering a surge in expired leases and vacant office buildings. Simultaneously, the residential housing market remains resilient, with active homes for sale in January 2024 sitting 40% below the levels recorded in January 2019.

It’d only make sense that many of these offices over time get converted into condos and apartments, right?

To gain a comprehensive understanding of the current office-to-apartment conversions landscape, ResiClub turned to RentCafe, an arm of property management software giant Yardi Systems.

Entering 2021, there were 12,100 office-to-apartment units in the U.S. conversion pipeline. Fast-forward to 2024, and that figure is now 55,300—an increase of 357% in just three years.

“Behind this shift lies a crucial factor: the $150 billion in office mortgages due by 2024. As residential space demand surges, developers are leaping at the chance to repurpose these aging giants,” wrote RentCafe in its latest report.

According to RentCafe, the office-to-apartment unit pipeline (55,300) makes up 38% of the 147,000 units currently being converted from commercial properties into apartment units. It’s followed by hotel-to-apartment (24%), factory-to-apartment (13%), and healthcare building-to-apartment (6%).

The biggest chunk of this 55,300 office-to-apartment unit pipeline can be found in Washington, D.C. (5,820).

Not too far behind is New York (5,215), Dallas (3,163), Chicago (2,822), and Los Angeles (2,442).

From a big-picture perspective, the 55,300 office-to-residential conversion pipeline might not be as significant as it appears at first glance.

Look no further than 25 Water Street, a 22-story former office building in Manhattan’s Financial District, which is being converted into 1,263 housing units. This one office conversion makes up 24.2% of New York, NY’s conversion pipeline and 2.3% of the U.S. conversion pipeline.

The 25 Water Street building totals 1.1 million square feet. For perspective, there’s 96 million square feet of office real estate available for lease in New York City alone.

Why aren’t there more office-to-resi conversions right now?

Commercial buildings may not be designed or constructed with residential living in mind. Converting office spaces into comfortable and functional apartments may require significant structural changes, such as adding windows, ventilation, or modifying floor plans. While office-to-resi conversions can often be done faster, they often cost more than just building a new building.

Additionally, while for sale housing inventory remains tight nationally, it has been a little softer in the very places that have the most empty offices. Not to mention, there’s an enormous amount of multifamily supply coming onto the market this year, particularly in Sun Belt markets.

The big picture finding: The overarching discovery is that while the conversion of office spaces into residential units is gaining momentum, it still remains a small segment of the residential housing market.

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