New economic reporting compiled by Yardi Matrix suggests that apartment conversions will yield 122,000 or more new units in the United States in the coming years despite a recent turndown that’s been recorded in the market since January 1st.

RentCafe has the latest data analysis to highlight a still-surging trend in the residential sector that has only mildly dampened over the last two years after reaching an apparent peak in 2019 and 2020. 

There are now 45,000 units on the way across the country as a product of office-to-residential conversions. Another 10,222 conversions were completed last year, propelled by a 43% increase in hotel retrofits. A total of 3,390 of the conversions were enacted within former office buildings — representing 34% of all conversion project areas nationally.

"Market conditions that favor such projects include significant multifamily demand or government incentives, specifically aimed at promoting historic restoration efforts, the same source shows," Yardi Matrix’s Senior Analyst Doug Ressler explained. "Construction costs and regulations on residential construction will continue to limit conversions to smaller, older office properties — whose floor plates make for an easier conversion — in markets with either high multifamily demand or government incentives aimed at historic restoration."

Los Angeles led all cities with a total of 1,292 units recorded, followed by Kissimmee, Florida (home to Disney World), which had a total of 648. Baltimore and Alexandria, Virginia placed third and fourth, respectively, despite nearby Washington, D.C. falling out of the top ten in what was labeled as a surprise (especially in light of its renewed focus under Mayor Muriel Bowser’s administration). 

"People are seeing office conversions as a solution to empty offices, to bringing people back into downtowns," Gensler's Steven Paynter told RentCafe in a supplementary interview. "They’re seeing it as a climate solution as well because you’re retaining all the embodied carbon, so it’s already doing a lot of things. Trying to layer on affordable housing as well is trying to make it too much of a golden goose. You can’t expect it to solve every problem, and I think that’s where the cities have to step in and actually help with incentives."

While many obstacles remain in place in the form of economic and political hurdles (not to mention the constraints presented by older office structures), the findings do present a "promising outlook" for the adaptive reuse and conversion market overall. The 122,000-unit figure represents a 63% increase when compared to the number of units projected to go on the market just two years ago. 

The hope now is to have added support on the part of government and private finance. The benefit, as always, will be felt by young workers and those in need of affordable housing, a lesson being taught in Massachusetts and other locales that have been proactive in embracing the reuse of buildings in the quest to deliver housing options to those most in need.

A look into Yardi Matrix's 2022 conversion statistics can also be found here.