A Record Number of Office Buildings Will Be Converted Into Apartments in 2024
Developers are set to repurpose aging office buildings into apartments at a record level this year, as the remote work trend has pushed up vacancy rates for commercial space across American cities.
This year, more than 55,300 housing units are being transformed from office buildings, a more than fourfold increase since 2021, according to a study out Monday from apartment listing service RentCafe. While demand for residential space continues to drive the surge, the 22% year-over-year growth is modest compared to the prior two years.
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Though the rate of growth for these types of conversions has slowed this year due to higher financing costs and long lead times associated with zoning and permitting, the trend is here to stay, according to Doug Ressler, business intelligence manager at Yardi Matrix, RentCafe’s sister company.
Local and state governments are increasingly incentivizing the conversions, especially as a growing number of office buildings “sit empty in the wake of hybrid work and preferences for newer, more efficient office space” after the pandemic, Ressler said in an email.
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Leading the charge this year is the Washington, D.C., metropolitan area, where plans are underway to convert office space into 5,820 apartment units, an 88% increase from last year. Following closely is the New York metro area, with 5,215 new apartments planned from former office spaces. A significant contributor to New York’s growth is the makeover of 25 Water Street in Manhattan — previously a JPMorgan & Chase Co. outpost — into 1,263 apartments, the country’s largest project of its kind.
In Dallas, which ranks third, the 3,163 housing units being crafted from offices represent 83% of all types of conversions — the highest share among the top cities. Dallas added more jobs over the last year than any other metropolitan area, with an increase of almost 140,000 in November 2023.
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Meanwhile, Chicago is ranked fourth despite a 9% decline from last year. The Windy City’s largest project, at 135 South LaSalle St., is set to yield about 430 units, roughly a third of the city’s total from former corporate buildings.