Over 1.2 billion square feet of U.S. office space — 14.8% of the total stock — has been identified as strong options for office-to-residential conversion projects.
A recent report by real estate software and services firm Yardi supports the expert view that office conversion trends are vastly driven by rising office vacancies and the dire need to repurpose underutilized commercial properties.
Yardi’s new Conversion Feasibility Index evaluated the suitability of office buildings for multifamily conversion by considering various factors including building age, location, square footage, and green-building certifications.
Yard’s Index categorizes buildings into three tiers, with Tier 1 representing the most viable for conversion. The data reflects the decrease in demand for traditional commercial office spaces and the growing need for urban housing.
Two of California’s largest cities, San Francisco and Los Angeles, had over 20% of their office spaces deemed suitable for residential conversion. Yardi found that Chicago and Miami also show considerable potential for these kinds of office conversions. Conversions not only address the surplus of vacant office space but also meets growing demand for housing.
Yardi’s report also reveals that 73.8 million square feet of office space are currently under construction nationwide — which could influence future conversion projects if proven to be a positive move for investors. It’s also worth noting, however, that total office sales through July 2024 amounted to $17.1 billion, but showed no substantial growth compared to the previous year.
The solution to convert office spaces into residences signifies a change that already is dramatically changing the future of work, urban planning, and real estate strategies. Several local governments have introduced plans to incentive these kinds of property conversions. For instance, Washington, D.C.’s Office-to-Anything Program offers a 15-year tax freeze.
