Office Real Estate Turns To Apartment Conversions — Do The Numbers Add Up? – BXP

The U.S. office real estate market has struggled in recent years as the COVID-19 pandemic drove companies to shift to remote work. While return-to-office orders at some companies have increased office activity in recent months, the value of office real estate is still greatly diminished. Meanwhile, a residential housing shortage has created heightened demand for apartments.

A solution enacted by several office developers is to convert office space into apartments. While the process is costly and complex due to city zoning, plumbing and utilities, more offices are being converted than ever, according to ResiClub.

In the U.S., 70,700 apartments will be created due to office conversions in 2025. In 2021, only 12,100 units were in the pipeline to be converted from offices to apartments, representing an increase in almost 500%.

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Conversions are concentrated in highly-dense, large U.S. cities. The office-to-apartment pipeline in New York City numbers 8,310 units; Washington D.C. and Los Angeles trail close behind at 6,533 and 4,388 units, respectively. All three cities have faced skyrocketing housing prices tied to a lack of supply.

Other building types being converted to apartments include hotels, factories and warehouses.

Office-to-residential conversions comprise only a portion of the new housing units in major U.S. cities. Only 3,709 were actually converted in 2024, paling in comparison to the nearly 600,000 total new units across the U.S., according to ALN Data.

Often, it costs more to convert an office to an apartment complex than to build a brand new residential building on its own.

BXP Inc BXP, SL Green Realty Corp SLG and Vornado Realty Trust VNO are among the publicly-traded office REITs with a presence in the New York market.

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