Office-to-apartment conversions break records again in 2025
Why the dramatic boost in this form of adaptive reuse?
While building conversion has existed since ancient times, this practice declined in the United States during most of the 20th century due to developers' access to cheap undeveloped land, personal vehicles that enable urban sprawl, and technological advancements that made demolition and rebuilding easier.
However, conversion momentum has started to build in the last 20 years.
Office-to-apartment conversions are projected (by Yardi Matrix/Rent Cafe) to hit an all-time high in 2025, with over 70,000 units expected—a dramatic leap from just 5,000 conversions in 2010. This unprecedented growth raises the question: What is causing this significant shift?
Several key factors are driving this surge in commercial-to-residential (not just office) conversions:
MARKET FORCES
💻 Work from Home
COVID-19, combined with technology and a cultural shift towards work-life balance, has sparked a work-from-home revolution. While some are returning to the office, many companies are downsizing or eliminating leased office space.
⬆️ Luxury Office Migration
Tech companies with ample funds are opting for modern luxury HQs instead of outdated Class A, B, or C office buildings.
📉 Financial Environment
The combination of increased interest rates and reduced demand for office space has created a perfect storm, leading to a commercial real estate crisis and liquidation sale of these assets.
SHIFTING SPACIAL NEEDS
🏭 Offshore Manufacturing
Companies have moved manufacturing operations to cheaper labor pools overseas or rural areas, leaving many urban factories and warehouses in need of a new life.
🛒 Online Shopping
Ordering to your front door has significantly reduced the need for brick-and-mortar retail.
SOCIAL & ENVIRONMENTAL IMPERATIVES
🏠 Housing Crisis
Over the past 30 years, restrictive zoning laws, construction limitations, and other factors have created a dramatic housing shortage nationwide. This undersupply has driven rents higher and pushed home ownership out of reach for many.
♻️ The Environment
Adaptive reuse is a suitable solution to reduce carbon emissions and waste from demolition for a climate-conscious society.
🏢 Urban Revitalization
The reduced in-office workforce has affected commercial core restaurant and retail areas that rely on the lunch, coffee, and happy hour crowd. Transforming underutilized commercial spaces into residential units can revitalize urban centers.
While conversions offer promising solutions, they are not the easiest project type from a financial, design, and construction standpoint.
Despite these challenges, which I'll discuss another time, I remain optimistic about this housing solution.
As these conversions continue to accelerate, will we see dramatic shifts in urban landscapes?
Will formerly struggling business districts transform into 24-hour neighborhoods?