Homes Became Offices, and Offices Became Homes

About 28,000 new rental apartments were created in the United States by converting large, former commercial buildings into residential ones from January 2020 through December 2021, a significant increase compared to prepandemic and a decade ago.

Old office buildings led the way in what is known as adaptive reuse, according to a new study by RentCafe, a real estate research, listings and property management company, which looked at the conversion of buildings into residences with at least 50 units.

As homes became remote offices in the pandemic, about 11,090 rental apartments were created in former office buildings, making up more than 40 percent of all adaptive-reuse units completed in 2020 and 2021, the study shows. Conversions of factories and hotels followed.

In 2018 and 2019, nearly 7,800 units were created out of office buildings. In 2010 and 2011, a total of about 2,700 were constructed.

With continued remote work, the demand for office space is declining: The national vacancy rate reached a record 19.1 percent in the third quarter of 2022, according to Jones Lang LaSalle, a commercial real estate services company. It should be no surprise that a high concentration of adaptive-reuse apartments were found in large cities like Washington, Philadelphia and Chicago, where offices are common.

Adaptive-reuse apartments are still a smaller share of development compared to 791,081 units of newly-constructed rental units built between January 2020 and December 2021. But that was just a 10 percent increase over the previous two-year period, while adaptive-reuse apartments rose by 25 percent in that period.

This year, Los Angeles is leading the adaptive-reuse drive, with 1,242 units completed. Nationwide, 77,100 adaptive-reuse units are under construction, planned or awaiting approval to be completed in the next few years.

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