As cities across the United States continue to grapple with high vacancy rates in commercial real estate, particularly in office buildings due to the rise of remote work, the concept of converting these vacant spaces into residential housing is gaining traction. With millions of square feet of unused office space and a growing demand for urban housing, adaptive reuse projects offer a sustainable, economically viable solution that can breathe new life into struggling downtown areas.
However, while the benefits of converting office spaces to residential uses are significant, there are also unique challenges involved. Cities that can overcome these hurdles stand to benefit from increased housing supply, revitalized neighborhoods, and a more vibrant urban economy.
Bob Waun, co-founder of DIRT Realty, is an advocate for the adaptive reuse of commercial properties. "We’ve seen firsthand how converting vacant office buildings into residential spaces can solve two critical problems at once: high office vacancy rates and housing shortages," says Waun. "DIRT Realty has studied and worked on several projects like these, and the results can be transformative for both the buildings and the communities they’re in."
Why Converting Office Buildings to Residential is a Good Idea
There are several reasons why converting vacant office buildings into residential units is a smart move for cities and developers alike:
Meeting Housing Demand: Many cities, particularly on the coasts and in growing metro areas, are facing housing shortages. Office-to-residential conversions help meet this demand without the need for new construction, which can be costly and time-consuming. By repurposing existing buildings, cities can quickly increase their housing stock.
Revitalizing Downtown Areas: Office districts that once bustled with activity are now seeing higher vacancy rates, leading to urban decay in some cases. Turning vacant office buildings into residential spaces can bring people back to these areas, increasing foot traffic and supporting local businesses. A greater residential presence in downtown areas also enhances urban vibrancy, leading to safer, more attractive neighborhoods.
Sustainability: Adaptive reuse projects are often more environmentally sustainable than building new structures from the ground up. By repurposing office buildings, developers can reduce construction waste and avoid the environmental costs associated with demolishing old buildings or constructing new ones.
Economic Efficiency: Many office buildings in urban cores are well-located, often close to public transportation, restaurants, and entertainment. This makes them attractive for conversion to residential uses. Additionally, with remote and hybrid work models here to stay, demand for office space is unlikely to return to pre-pandemic levels, making these conversions a smart long-term investment.
“Adaptive reuse isn’t just about turning empty buildings into housing,” Waun explains. “It’s about creating a sustainable future for urban centers by utilizing existing assets in a smarter, more efficient way.”
Challenges of Office-to-Residential Conversions
While the benefits are clear, converting office buildings to residential uses comes with its own set of challenges. These include:
Zoning and Regulatory Issues: Many office buildings are located in areas zoned specifically for commercial use. Developers often face zoning restrictions and must work with city planners to change the building’s official use designation. This can be a time-consuming process, though many cities are beginning to recognize the need for more flexible zoning policies in response to the demand for housing.
Structural Limitations: Office buildings are designed with very different infrastructure requirements than residential spaces. For example, the layout, plumbing, and ventilation systems in office buildings are often not suited for residential use. Converting these spaces can require significant retrofitting, which can drive up costs and extend project timelines.
Financial Feasibility: While converting vacant office space into residential units is often cheaper than building new structures, the costs can still be high. Developers must weigh the financial feasibility of a project based on factors like renovation costs, market demand for housing in the area, and the potential for return on investment.
Building Configuration: Many office buildings feature large, deep floor plates, which can be challenging when converting them into residential spaces. These floor plans often lack natural light and may need to be reconfigured to create apartments or condominiums that are livable and appealing to potential tenants.
“Every adaptive reuse project comes with its own set of challenges,” Waun admits. “But with the right planning and investment, we can overcome these hurdles. It’s all about working with city governments, developers, and investors to find creative solutions.”
Where is Office-to-Residential Conversion Being Done Successfully?
Several cities across the U.S. have embraced office-to-residential conversions as a way to address their housing challenges while revitalizing vacant or underused office spaces. Here are a few notable examples:
New York City: In response to the sharp decline in office demand, New York City has launched initiatives to promote office-to-residential conversions. The 40 Wall Street building, owned by the Trump Organization, has been considered for residential conversion due to high vacancy rates. The city is also evaluating opportunities to rezone certain areas to allow for easier adaptive reuse of office buildings. More information about New York City's efforts can be found on NYC Housing.
Los Angeles: Los Angeles has seen a surge in office-to-residential conversions, particularly in its downtown area. The Broadway Trade Center, a historic office building, is currently being converted into a mixed-use development with residential units, retail, and entertainment spaces. Another successful example is the SB Tower, which was transformed from a vacant office building into luxury loft apartments. Read more about LA's adaptive reuse projects at LA Department of City Planning.
Chicago: Chicago has also embraced adaptive reuse, with several downtown office buildings being converted into residential units. One notable example is The Clark Building, a 24-story office tower that has been successfully converted into residential apartments. Chicago’s LaSalle Street Corridor is another focus for conversions as the city looks to create more housing and bring life back to underused office spaces. Learn more about the LaSalle Street Corridor project on Chicago.gov.
Philadelphia: Philadelphia has seen a wave of office-to-residential conversions as well, with projects like 1616 Walnut Street leading the way. This 25-story office building was converted into a luxury apartment complex, helping to meet housing demand in the city’s Center City neighborhood. Philadelphia’s ongoing adaptive reuse efforts are part of its broader plan to address housing shortages while revitalizing the downtown area. Find more about Philadelphia's housing initiatives on Philadelphia Housing.
DIRT Realty’s Involvement in Office-to-Residential Projects
DIRT Realty has been actively involved in several office-to-residential conversion projects, offering valuable insights and experience to help cities and developers navigate the complexities of adaptive reuse.
“We’ve studied and worked on projects where office buildings were transformed into residential spaces, and the outcomes have been incredibly positive,” says Waun. “It’s not just about creating housing—it’s about revitalizing neighborhoods and making better use of urban assets that would otherwise sit vacant.”
DIRT Realty’s involvement in these projects has allowed the firm to build a deep understanding of the economic, logistical, and regulatory challenges that come with converting office spaces. By working closely with city governments, developers, and investors, DIRT Realty has helped bring these projects to life and is committed to continuing to push for innovative solutions that solve both the housing shortage and office vacancy crises.
Conclusion
The conversion of vacant office buildings into residential housing is an innovative and sustainable way to address housing shortages while revitalizing urban centers. As more cities embrace adaptive reuse, developers will continue to unlock the potential of underutilized spaces, creating new opportunities for growth and investment.
"Office-to-residential conversion is the future of urban real estate," Waun concludes. "We’re turning outdated office spaces into thriving residential communities—and that’s a win for everyone involved."
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