Record Number of Office-to-Apartment Conversions in 2024

The office-to-apartment conversion trend is gathering steam and expected to continue as weakening demand for office space and rising vacancies push the sector into oversupply in many cities, reports Wendy Broffman for Yield Pro.

According to the RENTCafe’s recently released annual Adaptive Reuse Report,  the number of these conversions has quadrupled since 2020, when the pandemic emptied offices and spurred an increase in remote work. A record-breaking 55,300 projects are anticipated in 2024.

The report says office conversions now represent 38 percent of the 147,000 apartments in future adaptive reuse projects. And the cities with the largest pipelines for these projects are Washington, D.C, New York City, Dallas, Chicago, Los Angeles, and Cleveland.

This type of adaptive reuse is typically financially unfeasible for developers because of the structural changes often necessary to make office buildings suitable for multifamily residential uses. But city and state tax credits and billions from the Biden Administration are helping to subsidize those prohibitive costs, making these projects.

“Many state and local governments are counting on office-to-apartment conversions to address the nation’s shortage of affordable housing and the post-pandemic surplus of vacant office buildings,” Broffman writes.