Can Empty Offices Solve Housing Woes?
Some cities are addressing the housing supply crunch by encouraging conversion projects with financial incentives. They sometimes offer up to 90% tax exemptions for 25-35 years, depending on when construction begins.
The popularity of office-to-apartment conversions is soaring, with 70,700 units expected in 2025—more than triple the 23,100 units in 2022.
The New York, Washington, D.C., and Los Angeles metros are set to see the most office-to-apartment conversions in the coming years, per the report.
Developers increasingly consider office-to-apartment conversions as rising vacancy rates, stagnant rents, and declining commercial property values make the shift more appealing. However, many office buildings require extensive plumbing, HVAC, and electrical retrofitting to meet contemporary building standards. As a result, many of these projects have stalled for years, fulfilling neither commercial nor residential needs. Of the 55,339 office-to-apartment units in development as of January last year, only 3,709 were completed by December.
So, while the volume of office-to-apartment conversions is growing, indicating increased interest in this type of retrofitting, don’t expect this to be the answer to a worsening housing shortage.
