Market Trends Show Potential For Office-To-Home Conversions – NMP Skip to main content

Market Trends Show Potential For Office-To-Home Conversions

Associate Editor
Nov 19, 2021

Apartment demand is surging at decade-high levels as office vacancies spike and working-from-home becomes the new normal.

KEY TAKEAWAYS
  • New York, Chicago, Los Angeles, and Boston show the greatest signs for potential office-to-home conversions.
  • In the 22 markets hardest hit by the pandemic, about 45,000 housing units can be created from former office units, or 6% of housing starts. 
  • In all 27 markets, apartment vacancy rates were lower than office vacancy rates, and apartment rent growth was outpacing office rent growth.
  • There is little potential for conversions in the Washington DC area, San Jose, Dallas, Houston, and Charlotte because office rents are on average higher than apartment rents so there is little incentive to convert. 

Apartment demand is surging at decade-high levels as office vacancies spike and working-from-home becomes the new normal. These new trends should spark the interest of every renovator and investor in the real estate industry, prompting them to ask whether it's worth converting these offices into homes, especially for multi-family rental housing or owner-occupied condominiums.  

NAR’s latest study, Analysis and Case Studies on Office-To-Housing-Conversions, shows lots of potential for conversion of class B office units in New York, Chicago, Los Angeles, and Boston; though, there is little potential in Washington DC and San Francisco. In the 22 markets hit hardest by the pandemic, about 45,000 housing units can be created from former office units, or 6% of housing starts. 

In the 27 metropolitan areas and submarkets analysed in the study, there was positive net absorption of apartments and negative net absorption of office units in the past 12 months, ending as of 2021 Q3. The largest decline in office space were in metro areas like New York  (- 21.8 million sq. ft. or MSF), Washington DC (-8.5 MSF), Chicago (-6.4 MSF), Los Angeles (-6.1 MSF), Boston (-4.96 MSF), and San Francisco (-4.95 MSF). 

In all 27 markets, apartment vacancy rates were lower than office vacancy rates, and apartment rent growth was outpacing office rent growth. Together, these indicators show that apartment demand is rising faster than office demand, showing potential for office-to-housing conversions. 

Class A and B buildings have strong potential for office-to-housing conversions due to vacancies being so high, compared to class C. Still, that doesn’t necessarily mean it's a wise investment. First, it’s best to ensure the rents of the newly converted building are higher than the rent of a class A or B office building. 

Charts shown in the study reveal that rents in apartment Class A buildings are, on average, higher than rents in Class B office buildings, so there will be an incentive to convert  these buildings into to Class A apartment buildings. However, office rents in class A buildings are still higher than the rents in class A apartment buildings, indicating little incentive to make this type of conversion. 

However, in some metro areas, the conversion of class B buildings is not economically feasible considering the office rent premium in these areas. In San Francisco, apartment rent is #52 per square foot and office rent is $57 per square foot. These undesirable gaps between office and apartment rent also exist in metro areas like San Jose, Dallas Fort-Worth, Charlotte, and Houston. 

Additionally, the study shows how approximately 44,500 housing units can be created from converting 20% of the vacant square footage into housing at an average size of 1,000 square feet per unit and with 20% common area. Out of all the total units, 77% are conversions of class B office buildings. The new housing units would account for 6% of housing permits that totaled  683,134 in the past year as of September 2021. 

The top 10 metros that show the greatest signs of potential for office-to-building conversions are New York (7,484 housing units), Chicago (5,688), Los Angeles (4,200), Orange County (3,065), Boston (2,808), Atlanta (2,799), Philadelphia (2,733), Minneapolis (2,081), Denver (2,009), and Seattle (1,709). 

However, there is little potential for conversions in the Washington DC area, San Jose, Dallas, Houston, and Charlotte because office rents are on average higher than apartment rents so there is little incentive to convert. 

There have been 8 case studies demonstrating the success factors for office-to-housing conversions in Maryland, Washington DC, New York, California, and Illinois. The studies showed that success depended on the commitment of local developers and investors with deep ties and experience developing projects in the local market. It is essential the project has a clear purpose and identification of the target market, whether it be first-time-buyers, luxury home buyers, or homeless people. This will help determine the location of the property, the amenities it requires, and the design of the building. Lastly, community buy-in is essential in getting the project to start and finish on schedule. 
 

About the author
Associate Editor
Katie Jensen is a mortgage news reporter at NMP.
Published
Nov 19, 2021
Gen Z Drives 19% Of Purchase Inquiries With Just 10% Down

LendingTree data shows millennials dominate mortgage shopping and match baby boomers’ $65,000 median planned down payment

Jul 24, 2026
Equifax Mortgage Revenue Rises 25% Despite Weaker Loan Volume

Credit-score pricing contributed heavily to the increase, while exclusive VantageScore use remained limited

Jul 24, 2026
Mortgage Servicer Satisfaction Rises Despite Borrower Strain

J.D. Power finds better digital service, fee transparency, and issue resolution are strengthening trust while homeowners face mounting financial pressure

Jul 23, 2026
Home Price Growth Accelerates, But Luxury Buyers Skew The Market

Redfin’s index rose 3% annually in June, with luxury demand and limited move-in-ready inventory supporting prices despite elevated mortgage rates

Jul 23, 2026
Lenders Expect More Volume Without Adding More Overhead

TMC survey finds lenders are looking to current sales teams, experienced recruits, and lower production costs to drive second-half growth

Jul 23, 2026
Higher Mortgage Rates Push Pending Home Sales Lower In June

Contract signings fell 5.4% from May as elevated borrowing costs and record home prices continued to pressure affordability, particularly for first-time buyers

Jul 20, 2026