Real estate developers want to make offices feel more like home, literally. Throughout 2020 and 2021, 41% of apartment conversions, or the transformation of an existing non-residential building into apartments, came out of old office space, according to a report by apartment research site RentCafe. .
This represents approximately 13,250 new rental units built from old offices over the past two years. It’s a form of adaptive reuse, or reallocation of an existing building for something new.
The numbers represent a trend spanning the past decade, says Tracy Hadden Loh, a member of Brookings Metro, which researches commercial real estate. Companies have spent less square footage per worker for years, she told CNBC Make It, as workplaces swap private offices for open floor plans. As employers consolidate their offices, building owners scramble to find new tenants – sometimes that means competing for residential occupants.
The trend could accelerate as remote working takes off in the post-pandemic world, businesses are shrinking their physical footprint even further, and real estate developers must figure out how to turn their spaces into something people will want to occupy.
Nearly two years after the start of the pandemic, office vacancy rates remain high in many major U.S. cities, and nearly a third of executives believe they will need less office space over the years. next three years due to remote work, according to a PwC survey.
Already, old office space is expected to account for a quarter of converted apartments in 2022, which will add around 12,300 rental units to the market.
Office buildings offer another crucial advantage that makes them attractive for a home conversion: location.
Cities with large office markets tend to have less housing nearby, says Loh; Meanwhile, the business districts are centrally located and very accessible by design, making it lucrative real estate. There could be a big incentive for developers to turn expensive, unused office space into expensive, sought-after housing.
Overall, a record 20,100 apartment conversions are expected to be completed this year, for a total of 32,000 units converted since the early 2020s, according to the RentCafe report and based on sister company data. Yardi Matrix, a real commercial. real estate research firm.
The practice of turning commercial space into rental housing has exploded over the past decade, RentCafe notes, with just 5,300 apartments converted in 2010. Hotels and factories were prime conversion spaces in the 2010s, although office conversions could be the next big trend in adaptation. reuse in the 2020s.
Compared to demolition and new construction, adaptive reuse may have a lower environmental impact, cost less, take less time to complete, and solve a number of housing affordability issues in some of the most popular cities. crowded and most expensive in the United States.
So far, Philadelphia and Washington, DC have converted the most new homes from old buildings in 2020 and 2021, while Los Angeles and Cleveland have the most projects lined up from 2022.
Do you really like your job? Try Method 15-5 to find out
How a 25-year-old disabled person lives on $ 33,000 in Chicago
A counterintuitive tip for deciding if a new job posting is really worth it
Register now: Get more information about your money and career with our weekly newsletter