What Makes Residential Conversions More Popular

Lenders  |  RE Agencies  |  Resources  |  Technology  |  Marketing  |  and more!

What Makes Residential Conversions More Popular

Jan 18, 2023 | News | 0 comments

According to a new report that claims occupancy transitions are producing more apartments than new construction, young adults may find the right place in a converted office building, a motel, or perhaps even a school or house of worship, especially in central business districts.

Over the 2020-2021 period, conversions of office buildings into apartments increased 43 percent to an all-time high of 11,090 units, according to the apartment listing site. It seems that other niches are following suit.

The second largest source of re-used properties was old or abandoned factories and industrial structures, with over 4,300 units. The floorplans of such spaces are often generous, which makes it easy to convert them to residential or mixed-use spaces. It is likely that this segment will grow as manufacturing shifts overseas.

In addition to hotels and motels, rooms can easily be converted into apartments in hotels and motels. According to a five-year plan, the city of Denver recently purchased three motels that will eventually house hundreds of homeless people.

There are a few reasons why old office buildings dominate the list, including their downtown locations, which were largely abandoned during the pandemic and have been slow to recover since most workers now prefer to work from home. Buildings with the highest heights are usually located downtown.

During the survey period, Chicago, Washington, and Philadelphia were the hotbeds of conversion. In total, 15 percent of apartments across the country were converted in the three cities alone. Some smaller markets produce significant shares as well.

Even before the pandemic, conversions were on the rise in the nation’s capital. As COVID reached its height, the CBD’s vacancy rate increased to a ‘significant’ level. Approximately 4 million square feet of outdated office space are being converted or considered for transformation, according to Washingtonian magazine.

Over the next few years, RENTCafe predicts the majority of conversions will come from hotels and office buildings that are no longer in use. However, nowhere will the trend be more noticeable than in Los Angeles, where 4,100 apartments have been approved, are awaiting approval, or are under construction. That’s in addition to the 1,250 units already converted this year.