Office-to-residential conversions make up 47 per cent of all future adaptive reuse projects planned in the U.S. and 12 of the top 20 metropolitan areas account for the majority of projects planned.
“The scale is much bigger — and accelerating faster — than most people assume,” says Doug Ressler, manager of business intelligence at Yardi Matrix, which is Yardi Systems’ commercial real‑estate data division, providing property‑level data in the U.S. for multifamily, office industrial and other building uses.
Ressler says there are more than 90,000 apartment conversions in the office-to-residential pipeline, a year-over-year growth of 28 per cent.
That number is nearly four times higher than in 2022.
Not surprisingly, New York City leads the way in conversions by a wide margin, currently with 16,358 apartments, about double Washington, D.C, and more than three times as many as Chicago or Los Angeles, according to RentCafe, a rental housing platform/software ecosystem and the sister company to Yardi.
Ressler says conversion viability in New York is largely driven by rent levels and capital markets. Most of the conversions were built between 1960 and 1990 and have small and narrow floorplates, suitable for conversion.
He says the U.S.’s second largest city, Los Angeles, has a mixed building stock and the floorplates of many of its old office buildings are deeper than New York’s, making them less viable for conversion.
What has shaped the office-to-residential movement in LA is government policy.
The LA Adaptive Reuse Ordinance “is one of the earliest large-scale examples in the U.S. of office (to) residential conversion as (an) urban regeneration strategy.”
Ressler says the ordinance was first adopted in 1999, focused on downtown LA conversions. By removing zoning and code barriers the ordinance has seen the creation of more than 12,000 residential units from obsolete office and commercial buildings.
But the ordinance was updated earlier this year for a city-wide approach, allowing conversion of commercial buildings 15 years old and other buildings five to 15 years old through administrative approval. It includes conversions from office, retail, hotels and, in some cases, parking structures, he says, pointing out previous policy only allowed conversion of pre-1974 buildings in some areas of the city.
The new rules, which “streamlines approvals significantly,” allow for flexible interior reconfiguration and reduce or freeze the parking requirements.
Los Angeles made the policy shifts, driven by the same “macro drivers” as New York City – in large part because of the pressing shortage of housing but also updated the ordinance because the “office vacancy shock,” Ressler says, noting LA has more than 50 million square feet of vacant office space.
According to the Conversion Feasibility Index (CFI), a propriety tool that is part of a CommercialEdge suite designed to assess conversion possibilities, there is 1.9 billion square feet of office space in the U.S. suitable for conversion.
The CFI uses a weighted scoring system to evaluate various characteristics of a building and its placement to determine suitability, says Ressler. Building age, square footage, depth, mid-block location, number of storeys, floorplate shape, ceiling height, green building certifications, walkability and transit accessibility are factors, Ressler says.
One study in Canada also highlights the benefits of adaptive reuse. Read the findings here.
