Conversion activity gaining momentum

Contributors:

Elena Lanning

As older-vintage segments of the office market have grappled with an unprecedented slowdown in demand, 2022 is on pace to see the largest volume of functionally obsolete office space removed from the inventory on record.
While major markets in the U.S. have averaged close to 10 m.s.f. of inventory removals annually prior to the pandemic, the pace of conversions has accelerated since 2021 – driving the overall rate of inventory removals 16% higher than pre-pandemic averages.
As obsolete properties are repositioned, a diminishing share of redevelopment space is becoming renovated office: from 2015-2019, more than one-third of buildings taken offline for redevelopment remained office; from 2021-present, just 12% of redevelopments were planned for office.

Public-private office pricing disconnect is intensifying