For decades, office towers symbolized economic growth and urban vitality. But in the wake of remote work and shifting tenant demand, those once-coveted spaces now pose a question: What do we do with millions of square feet of underutilized office space? Enter the era of office-to-residential conversions—a trend rapidly gaining traction in commercial real estate (CRE).
Why Conversions Are on the Rise
The U.S. office vacancy rate reached 19.0% in Q2 2025, with Class B and C buildings particularly vulnerable as tenants favor modern, amenity-rich Class A assets. At the same time, multifamily demand remains strong as housing shortages grow, positioning conversions as a practical remedy—repurposing aging office space into much-needed residential housing. CBRE forecasts the vacancy rate will moderate to 18.9% by the end of 2025, though a large volume of obsolete inventory will persist, fuelling the adaptive reuse rationale.
Developers and investors are acting on this shift. Office-to-apartment conversions have climbed from 23,100 units in 2022 to a projected 70,700 in 2025—a 357% surge. Urban markets—including New York, Chicago, and Washington, D.C. are leading the way, supported by local incentives and zoning reforms that facilitate downtown revitalization
The Economics Behind the Movement
Conversions aren’t without challenges. The cost of retrofitting an office building into residential units can range from $100 to $500 per square foot, depending on structural complexities. Floor plate depth, window access, and plumbing requirements can make or break a project. That’s why many successful conversions target buildings from the 1970s and 1980s, which often have layouts conducive to housing.
But the math is compelling when done right. Converting office space into residential units can significantly increase asset value and stabilize income streams. For investors, this presents an opportunity to reposition struggling assets in a high-demand segment.
Implications for CRE Professionals
For brokers, conversions represent a new line of business—helping owners identify properties best suited for residential use. For asset managers, the question becomes whether to hold, sell, or retrofit underperforming assets. For marketers, the challenge is repositioning these properties with compelling narratives that resonate with city planners, investors, and end-users alike.
Local governments are also shaping this trend. Many cities offer tax abatements or fast-track permitting for conversion projects, which can dramatically impact project feasibility. Staying informed on policy developments is critical for anyone advising clients in this space.
What This Means for the Future
Office-to-residential conversions won’t solve every CRE challenge, but they represent a vital adaptation in an era defined by hybrid work and urban evolution. The ability to pivot is what separates resilient CRE strategies from stagnant ones. Whether you’re brokering deals, managing assets, or marketing properties, understanding this trend is essential.
