With increased demand in the rental market and more office vacancy as a result of remote work ordinances, the National Association of Realtors reports a strong potential for the conversion of Class B office units into rental housing properties in metropolitan areas with the greatest declines in office occupancy.
Office-to-housing conversions would slow market demand and resolve building vacancies left behind by the COVID-19 pandemic. Cities like New York, Los Angeles, Chicago, and Boston would benefit from office-to-housing conversions as apartment rent growth outpaces office rent growth with more demand for single and multifamily rental housing.
Apartment demand is soaring at a decade-high level, while office vacancy rates have spiked, and hybrid working-from-home situations are emerging to be the new normal. This has prompted the question of converting vacant office buildings into housing, particularly multifamily rental housing or owner-occupied condominiums. NAR's latest study―Analysis and Case Studies on Office-to-Housing Conversions― shows a strong potential for conversion of Class B office units in New York, Chicago, Los Angeles, and Boston, but little potential in Washington DC and San Francisco. In 22 markets that have been hit hardest by the pandemic, about 45,000 housing units can be created, or 6% of housing starts.