Office conversions accelerate, but many older buildings face demolition: reports

Workplace conversions are gaining popularity throughout the U.S. as constructing homeowners work to repurpose vacant area amid record-high vacancies and cities search to handle housing shortages, Yardi stated in its June 2025 Nationwide Workplace Report on Wednesday. 

The common nationwide emptiness fee remained excessive in Might at 19.4%, down 30 foundation factors from April however up 160 foundation factors yr over yr, in accordance with Yardi Matrix knowledge. 

Conversions, together with demolitions, will reduce U.S. office inventory greater than new workplace area deliveries will add to it this yr, which ought to assist scale back vacancies and assist the market’s restoration, CBRE says in a report launched June 3. 

Among the many 58 markets CBRE tracked, it expects 12.8 million sq. toes of area to be transformed to different makes use of this yr and a further 10.5 million sq. toes to be demolished. The agency estimates simply 12.7 million sq. toes of latest workplace provide. 

Each conversions and demolitions have accelerated because the COVID-19 pandemic, with the U.S. conversion pipeline of deliberate and underway tasks reaching 81 million sq. toes throughout 44 markets in Might, per CBRE’s report. That is 1.9% of complete U.S. workplace stock, up from 1.7% of stock simply six months in the past, CBRE says. 

The variety of conversion proposals has elevated yearly this decade, Yardi says. From 2018 to 2024, the U.S. averaged 58 workplace conversions yearly, CBRE notes; 2024 noticed 94 tasks totaling 13.1 million sq. toes accomplished. About 68 conversions totaling 12.8 million sq. toes are anticipated to be accomplished this yr, CBRE says. 

Not all workplace buildings are appropriate for conversion, nevertheless. Many workplace buildings constructed within the Seventies and Nineteen Eighties have massive floorplates that make them much less appropriate for multifamily items, CBRE says. Consequently, older buildings account for over half of demolitions and solely 35% of conversions, in accordance with the CBRE report. Constructing measurement and placement, rising building prices, much less labor availability and persistently excessive rates of interest additionally issue into conversion or demolition selections, including additional impediments, CBRE says. 

Simply over 70% of deliberate and lively workplace conversion tasks by sq. footage are conversions to multifamily housing, CBRE says. This is because of stronger fundamentals within the multifamily housing market, which has seen decrease emptiness charges and better rents in contrast with the workplace sector, and easing laws and incentives on the metropolis stage meant to handle housing shortages and enhance property tax revenues, per the CBRE report.

“Whereas impactful on the native stage, [office conversions remain] a modest contribution to the nationwide housing provide,” the agency says. 

Workplace conversions to life science makes use of have declined from their pandemic-era peak, after they have been the second-most-common kind of conversion and new building lagged demand, CBRE says. Now, accommodations have taken that spot, making up 8% of complete workplace conversions by sq. footage, per the report. 

Execution varies by metropolis

Conversion exercise throughout the U.S. varies enormously by market, relying on constructing values, stock age, building prices and the provision of skilled builders, CBRE says. 

Manhattan has one of many lowest emptiness charges within the U.S, which means unused area shortly turns into focused for adaptive reuse, per the Yardi report. New York Metropolis established the Office Conversion Accelerator program to help constructing homeowners and operators with conversions by analyzing the zoning feasibility of particular person tasks and serving to safe vital permits. 

Manhattan at the moment has 10.3 million sq. toes of conversion area underway or deliberate, main the nation, CBRE says. Whereas that is partially resulting from market measurement, NYC Mayor Eric Adams’ “Metropolis of Sure for Housing Alternative” zoning reform can also be spurring conversion exercise, per the report. 

As of Might, Boston had 15 office-to-residential conversion tasks totaling 762 items both proposed or authorised, with related conversion tasks shifting ahead in different Massachusetts cities like Worcester and Lowell, Bisnow reported Tuesday. 

Massachusetts in March launched a brand new program to assist redevelopment of business properties into housing. As a part of the Commercial Conversion Initiative, MassHousing allotted as much as $1 million in planning funds for technical help to those tasks, with the state additionally awarding tens of millions of {dollars} extra to workplace constructing landlords in downtown Boston and Worcester to transform their buildings, Bisnow reported.