current office conversion news —
More Office Conversions Underway to Revitalize Downtowns
April 11, 2024
2 Minute Read
There has been a notable increase in office-conversion projects over the past six months, as urban office districts undergo a much-needed transformation. Nearly 70 million sq. ft. of office space or 1.7% of total U.S. supply was undergoing conversion to other uses in Q1 2024, up from 60 million sq. ft. or 1.4% of total supply in Q3 2023.
Office-conversion completions are expected to more than double this year over last. And with hundreds more of these projects in the pipeline, many urban office centers are slowly being transformed into more vibrant, commercially diverse districts.
Approximately 120 office-conversion projects nationwide—one-third of them to multifamily—are expected to be completed this year, compared with an annual average of 45 between 2016 and 2023. This pipeline indicates higher-than-average conversion completions over the next several years.
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Markets with a lot of older office buildings have the most office conversions planned or underway. Cleveland has the highest percentage of its total office inventory (11%) undergoing or planned for conversion, while Houston has the most total square footage at 6.2 million. Eight of the top 10 markets for conversion activity had an office vacancy rate above the 18.6% U.S. average as of Q4 2023.
Downtown Cleveland is a notable example of an office-dense urban market that has benefited from converting outdated and largely vacant office buildings into apartments and hotels. Since 2016, more than 3.5 million sq. ft. of downtown Cleveland office space has been converted to other uses, resulting in an 18% reduction in its total office inventory and reducing its vacancy rate to 17.3% from 19.7%.
more:
https://www.cbre.com/insights/briefs...lize-downtowns
Figure 1: Office Conversions by Construction Status & Estimated Year of Completion
Source: CBRE Research, Q1 2024