Snapshots

With weeks remaining in Q3, office conversions reach new record volume for 2024

September 16, 2024

Contributors:

Midway through September, the continued growth in redevelopment activity has already driven office conversion volume to record levels in 2024, with more than 24 million s.f. of office removed for conversion projects YTD. Overall inventory removals have reached over 98% of 2023’s record levels.

Local incentives continue to be a major factor in facilitating a greater volume of office-to-residential conversions: in recent months, the cities of Seattle and Denver have both passed new tax incentive programs to promote office-to-residential conversions. 13 of the 20 largest CBD markets have now created new incentive programs since 2020.

Since August, rumored conversion proposals have surfaced across several markets—New York’s Flatiron Building (205,000 s.f.), 5 Times Square (1.1 million s.f.), 419 Park Avenue South (160,000 s.f.), the Longfellow Building (188,000 s.f.) in Washington, DC, and 400 South LaSalle (400,000 s.f.) in Chicago have been among the most notable potential projects.

Q3 is slated to be the third consecutive quarter in which overall national office inventory declines as inventory removals exceed new deliveries. The current pace of inventory removals already exceeds new groundbreakings by over 20 million s.f. per year, a spread which continues to widen as conversion projects gain momentum and office groundbreakings remain exceptionally rare.

Net effective office rents have increased since the pandemic in most major CBDs

Sun Belt markets are exceeding 98% of pre-pandemic office leasing volume over the past six months

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