Pandemic Pushes Office-To-Tenant Conversions To An All-Time High

Before the Covid virus changed the face of business and the workplace, new offices were being built at record rates. When remote work suddenly rendered them superfluous, it neatly aligned with a great need for housing of all kinds, creating an ideal scenario for adaptive re-use.

The results are becoming clear: according to a survey recently released by RentCafe, adaptive reuse apartments are increasing faster than new apartments, up by 25% in the last two years compared to the pre-pandemic period. Conversions from office buildings to apartments are at an all-time high, having made way for 11,000 apartments in just the last two years. Additionally, there are 77,000 apartments under conversion, setting the stage for a boom in adaptive reuse in the coming years.

This increasingly popular real estate niche brought a total of 28,000 new rentals in 2020-2021, well above the pre-pandemic years of 2018-2019, when 22,300 apartments were brought to life through adaptive reuse.

RentCafe.com is a nationwide apartment search website. This report was compiled by the RentCafe research team based on apartment data provided by its sister company, Yardi Matrix.

RentCafe compared the latest figures to the rate of growth in traditional new apartment construction; their analysis shows that adaptive reuse apartments were growing faster than new apartments — 25% versus 10% — during the same time frame.

Office-to-apartment conversions increased even faster, a 43% jump during 2020-2021 compared to 2018-2019, from 7,762 to 11,090 apartments created from former offices. The total conversions in 2020-2021 represent an all-time high, the repurposing of office buildings through adaptive reuse taking an extraordinary leap not just in the last two years, but over the last decade as a whole, from the mere 2,700 apartments brought to life in 2010-2011. Former offices make up 40% of all adaptive-reuse conversions to rentals between 2020-2021, the highest share.

Adaptive reuse apartments are poised for impressive growth in the near future, with over 77,000 apartments currently undergoing conversion. In fact, 8,300 apartments have already been converted and opened to the public this year, as of July 2022.

Washington, DC, Philadelphia and Chicago became hotbeds for adaptive reuse between 2020-2021: these three major cities alone delivered 15% of the total apartment conversions nationwide. Washington, DC surpassed all other cities when it came to adaptive reuse during the first few years of the pandemic. The nation’s capital opened a total of 1,565 apartments by repurposing old buildings, almost double the number converted here just two years prior. With that, Washington, DC holds almost six percent of total adaptive reuse projects in the US Nearly matching Washington, Philadelphia maintained its track record in conversion projects. The City of Brotherly Love transformed older buildings into 1,552 new apartments in the last two years, after a previous all-time high of 1,854 between 2018-2019.

Meanwhile, despite leading in total conversions in the last decade, this time Chicago landed in third place with 1,139 apartments. The top five is rounded out by Cleveland and Pittsburgh, with 837 and 814 converted apartments, respectively.

The last two years certainly demonstrated the potential for creating new housing from offices. This type of building conversion dominated this time period by making up 40% of transformed units. However, with the rise of hybrid and remote work, developers are turning towards a different kind of makeover and choosing live/work/play development as a way to resuscitate office buildings.

With 4,331 apartments, factories are the second-most sought after conversion sources. Between 2020-2021, factories represented 16% of adaptive reuse projects. As manufacturing continues to shift overseas, many abandoned industrial spaces offer generous floor plans that make for a great transition to residential and mixed-use spaces. Smaller niches are also emerging and expanding at a fast pace. Surprisingly, conversions of healthcare buildings actually recorded the largest growth during the pandemic. In fact, apartments adapted from healthcare buildings more than tripled in 2020-2021 compared to 2018-2019, increasing by 212%.

Interestingly, religious buildings take second place when it comes to popularity, with a 73% growth. A small niche that resulted in only 311 converted apartments between 2018-2019, religious buildings that were converted into residential spaces gave way to a total of 537 apartments in the past two years.

Finally, with 3,573 apartments in 2020-2021, hotels remain one of the most popular building types to be converted into rentals, registering a 66% growth compared to 2018-2019. The straightforward transition from hotel rooms to apartments is one of the reasons hotels remain one of the primary sources for adaptive reuse.

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