Developers Target Hotels for Adaptive Reuse Projects in Major US Cities

The need for housing is being felt across the nation, with more developers choosing to repurpose commercial properties into apartments. Over the past few years, the move to hybrid and remote work styles caused developers to turn to adaptive reuse in an effort to combat growing vacancies across office properties. However, 2023 also saw an increase in the adaptive reuse of hotels into apartment buildings. Market insights from online leasing and resident services platform RentCafe show that hotel conversions made up 4,500 of the nearly 13,000 apartment units added to the nationwide multifamily market in 2023. Currently, there are approximately 151,000 apartment conversion projects in various stages of development, with large cities such as New York City observing a stronger push toward the adaptive reuse of hotels.

It’s not news that the hotel sector has faced many challenges and undergone transformations in recent years — particularly due to the pandemic, which caused a flight to quality in the tourism sector. Unsurprisingly, outdated hotels bore the brunt of reduced traveling and steep debt service costs, prompting many owners to offload their underperforming properties.

Naturally, this created an opportunity for developers to swiftly repurpose these properties into apartment buildings, especially in places boasting a large number of hotel properties, such as New York City. And, because hotels already come equipped with essential infrastructure (such as plumbing and electrical systems), these adaptive reuse projects offer a faster and often more cost-effective method to create housing units, particularly in dense, urban areas where space for new construction is scarce or pricey.

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