Prospects for Adaptive Reuse of Office Buildings

In the last year, a growing number of municipalities across the US have proposed initiatives to convert vacant commercial office buildings to multifamily buildings in response to both 30-year high office building vacancy rates, arising from increased remote work, and the worsening affordable housing crises. Since most office space leases that commenced before the pandemic have not yet expired, this situation is likely to escalate.

While adaptive reuse initiatives may seem like a remedy for declining urban areas and housing shortages, the reality of retrofitting offices to residences is far more complicated than updating zoning laws. Apartments have vastly different requirements from offices, requiring complete replacement of most building systems and likely structural modifications to the building envelope. The shape and size of many office buildings also limits the area that can be utilized for habitable spaces, in many instances, creating severe limitations to the amount of housing that can be developed. Furthermore, rental rates for office space remain higher than for multifamily housing, which deters building owners from undertaking these conversions.

This Guidehouse Insights thought leadership paper describes the rationale for office-to-housing adaptive reuse initiatives in the US and analyzes the challenges associated with converting office buildings to multifamily housing. While adaptive reuse of this type is likely to remain limited, the paper provides recommendations for maximizing the benefit of these opportunities.