Multi-housing leading office conversion activity

Contributors:

Post-pandemic demand shifts are driving developers to limit office redevelopment: from 2015-2019 nearly half of offices taken offline were redeveloped as office, but since 2021 more than half were redeveloped or converted into multi-housing, and just 6% has been dedicated to traditional office.
Converted product largely consists of Class B and C assets over 30 years old, which have not generated positive net absorption on a quarterly basis since Q2 2019, inventory removals help to moderate vacancy rates and new residential developments help to rejuvenate CBDs where return-to-office has been limited.
On average, office remains the most valuable property type among major sectors on a per s.f. basis, but outpaced price growth for multi-housing has narrowed pricing spreads, improving the economics of office-to-residential conversions.
Housing affordability crises in major markets are spurring incentives for residential conversions–most gateway markets have created or proposed new incentives since 2020.

Public-private office pricing disconnect is intensifying