Office Conversions Double as Space Goes Underused

There are now clear signs that a drive to adapt underused office space in many of the nation’s cities for other uses is under way. The 100 office conversions due to be completed this year represent more than double the annual average of 41 between 2016 and 2022.

Square feet also tell the tale, up 1.2% since Q4 2022 to 60 million SF in conversions currently planned or underway, a new CBRE report reveals. As of 3Q 2023, an additional 42 projects are underway for 2024 with 18 more planned, while plans have been announced for 20 in 2025 and 117 for the years 2026 and beyond. 

Nevertheless, CBRE cautions, “Conversions alone cannot resolve the challenges facing the U.S. office market.”

The highest share of conversions is from office to multifamily (48%), life sciences (19%), and mixed use (18%), with single-digit percentages for other, industrial or hotel uses. 

Markets with a relatively high number of older office buildings have the most office conversions planned or underway, the report notes. But that is not always the case. Conversions of 63 buildings constructed since 2000 are also planned, underway, or recently completed. Projects in various stages of construction include 89 structures built before 1900, 175 built between 1900 and 1949, 207 built between 1960 and 1979, and 202 built between 1980 and 2000.

The leader in office conversions by square footage and as a percentage of total office inventory is Cleveland, with 11% planned or underway and just over 6% of the total 3.5 million SF designated for multifamily use. The city is followed by Cincinnati with 2.4 million SF (7%), Boston with 6.1 million SF (3.6%) – all for life sciences use, Houston with 5 million SF (2.5%), and San Francisco with 2.9 million SF (2.3%). Other cities in the top 10 are Chicago, New Jersey, Dallas/Fort Worth, Washington, DC, and Manhattan.

Many state and local governments have incentive programs for office conversion projects. The federal government is also creating incentives intended to make the process more financially feasible for private developers and to address the acute need for more affordable housing, CBRE noted.

“Cities that have financial incentive plans to transition obsolete buildings into newer and better uses will help transform older office districts into vibrant mixed-use centers that occupiers and consumers desire,” the report stated.