Office Conversions Take Center Stage Nationwide
Increased vacancy within office buildings has fueled a growing number of developers and property investors that are considering a repositioning of aging and obsolete office buildings into “new uses that better cater to changing work and living habits.” Currently there are about 100 such conversion projects underway across the U.S., representing a sharp increase compared to the “annual average of about 40 office conversions between 2016 and 2022,” with “more than 200 office conversion developments planned or anticipated to be completed in the next three years.” Multifamily conversions account for nearly half of the conversion projects underway or planned, followed by office-to-life science conversions at about 20%, with mixed-use and industrial conversions representing a much smaller share of the pipeline. However, conversions aren’t always feasible due to multiple hurdles including complicated financing, environmental challenges, and the properties’ physical attributes. In addition, office-to-residential conversions cost an average of about 20% more than ground-up development, increasing the possible necessity for public incentives.