Where Office-to-Resi Conversions Are Growing Most—and Why

February 18, 2025

New data highlights which markets are primed for faster adoption.

It’s no surprise that more cities with consistent office-to-residential pipelines are starting to implement guidelines, frameworks and tax incentives to aid developers. At the beginning of the year, there were a whopping 168,500 units in various stages of conversion across the U.S., 70,700 of which were from office buildings alone, a new RentCafe report shows.

A nationwide housing shortage and underutilized office space are increasingly fueling such conversion projects. So much so that companies are creating entities specifically aimed at this. For example, in December, Dune Real Estate Partners and TF Cornerstone formed a $1 billion venture.

The office conversion pipeline grew nearly 28 percent since the beginning of 2024. In four metros, units in such projects more than doubled year-over-year. This includes Boston (up 160 percent, to 1,167 units), Jacksonville, Fla. (150 percent, to 1,418), Omaha, Neb. (141 percent, to 1,294) and Charlotte, N.C. (107 percent, to 1,787).

Exterior shot of mid-rise office building at 85 Devonshire St. in downtown Boston. The asset is an upcoming office-to-residential conversion target. — In Washington, D.C., KS Partners is converting the 1909-built 85 Devonshire St. into residential, together with the adjacent 262 Washington St. The ground floor will continue to be used as retail space. *Image courtesy of Yardi Matrix*

Boston launched its office-to-residential conversion program in 2023. The city extended it in 2024 by setting aside an additional $15 million in funding for incentives and expanding the application deadline until the end of this year. The metro had 3,026 units in the conversion pipeline, of which 1,167 were in projects involving office properties, RentCafe figures show.

What's more, CommercialEdge's Conversion Feasibility Index—a tool created to better identify buildings with the most potential—shows that Boston has a significant amount of space ripe for adaptive reuse, ensuring future office-to-residential growth. As of mid-February 2025, the metro had 163 properties with a CFI between 90 and 100 (Tier 1), encompassing nearly 11.5 million square feet of office space that showed the highest potential.

While Jacksonville doesn't have as much space available for this as other major metros, its office-to-residential pipeline growth was still significant. The market had nine office buildings within the Tier 1 CFI bracket, totaling just under 600,000 square feet. Overall, Jacksonville ranked 14th, with 1,418 units to come online from office assets.

Perhaps one of the largest contributors to growth in Jacksonville is the upcoming redevelopment of the former FBI headquarters at 7820–8000 Arlington Expressway. The 16.2-acre site, which currently has four vacant buildings, could potentially become 779 residential units across eight structures, according to local news reporting. Development costs were estimated at $79 million last year.

Omaha and Charlotte's upcoming large-scale conversions

The other two markets with booming pipelines, Omaha and Charlotte, both had massive office-to-residential projects approved last year.

Omaha—which in February last year was the highest-ranked emerging multifamily market—had nearly 2.5 million square feet of office space in buildings with a CFI score between 90 and 100, according to CommercialEdge data.

Exterior shot of the office building at 1620 Dodge Street in downtown Omaha, Neb. The asset is a potential office-to-residential conversion target. — NuStyle Development is aiming to acquire the 1971-built asset at 1620 Dodge St. from its long-time owner and occupier, First National Bank of Omaha. *Image courtesy of Yardi Matrix*

Most of Omaha's office-to-residential growth can be attributed to NuStyle Development, which is currently working on two such projects. The company is reportedly in talks to acquire the 22-story office building at 1620 Dodge St., currently owned by First National Bank of Omaha. NuStyle aims to transform it into 300 market-rate units, with costs estimated at some $85 million and completion scheduled for 2026.

NuStyle's second project is the transformation of the Central Park Plaza twin towers, estimated at $163 million. The 590,491-square-foot asset at 222 S. 15th St., also in downtown Omaha, is planned to become a 700-unit community after a multi-phase process, with full completion set for 2027.

In Charlotte, the inventory of potential conversion candidates measured more than 970,000 square feet across nine office buildings that had a CFI between 90 and 100, according to CommercialEdge. At the start of the year, the market had 1,787 units in various stages of conversion from office properties.

MRP Realty and Asana Partners acquired the former Duke Energy Co. headquarters at 525 S. Church St. in Charlotte's CBD. Plans call for the conversion of the 873,840-square-foot office asset into 448 luxury rental units, as well as 25,000 square feet of retail. Costs are estimated at $250 million, Charlotte Business Journal reported last year.

NYC, D.C., L.A. on top

At the start of 2025, Washington, D.C., Los Angeles and New York City had a combined 19,231 units in various stages of conversion from office. All three cities have many buildings feasible for office-to-resi changes (a CFI of 90 or above):

Los Angeles has 267 office buildings ripe for conversion, encompassing nearly 25 million square feet.
Manhattan alone has 907 buildings with a CFI between 90 and 100, or more than 100 million square feet.
Washington, D.C., has 172 assets with Tier 1 conversion potential, totaling almost 15 million square feet.

In 2023, New York introduced the Office Conversion Accelerator Program, which helps projects of at least 50 units. Companies can also access a 90 percent tax abatement for up to 35 years if the project is south of 96th Street in Manhattan and has at least 25 percent of the units set aside for residents earning up to 80 percent of AMI.

235 E. 42nd Street, in Midtown Manhattan — 235 E. 42nd St., the former headquarters of Pfizer, which will be combined with the adjacent 219 E. 42nd St. as part of the development. *Image courtesy of Yardi Matrix*

One such project is 235 E. 42nd St., the former headquarters of Pfizer. Last month, David Werner Real Estate Investments and Metro Loft Management secured $135 million in first-mortgage financing for the redevelopment of the 33-story asset into 910 units. The adjacent property, at 219 E. 42nd St., is also the target of adaptive reuse by the same duo. A total of 1,600 units will be available across the two buildings, which makes this the largest such project in the area.

In Washington, D.C., authorities targeted the downtown area for redevelopment, putting together the Housing in Downtown program. It offers a 20-year tax abatement for commercial-to-residential projects and capped funding that will rise up to $41 million in 2028. A similar program targets office buildings specifically—Office-to-Anything is not necessarily aimed at creating new housing but rather bringing new life into underutilized office assets.

Recent projects in the market included Willow Bridge Property Co.'s Balsa, at 1313 L St. NW, which wrapped up. The former office building now offers 222 market-rate units, half of which are already leased. In August last year, Duball acquired a 190,385-square-foot office building, also in downtown, which it aims to redevelop into a 161-unit community.

A rendering of 3324 Wilshire Blvd. in Los Angeles, an upcoming office-to-residential project. — Jamison and Arc Capital aim to complete the conversion of 3324 Wilshire Blvd. over 18 to 24 months. *Image courtesy of Donaldson + Partners*

Los Angeles authorities are set to vote on a new Citywide Adaptive Reuse Ordinance, which is an update to its 1999 legislation, aiming to revitalize underutilized existing buildings. The new rules would expand existing incentives to encourage the conversion of structures newer than 1974, while also establishing a faster approval process, among other changes.

A significant such project broke ground in November last year. Jamison and Arc Capital started work on 3325 Wilshire Blvd., aiming to transform the 233,000-square-foot building into 236 multifamily units and 15,000 square feet of retail.

Another factor helping conversions in some of these markets is the assumption of lasting rent gains. If market conditions remain favorable, advertised asking rents are set to perform well in New York City (up 3.1 percent in 2025), Washington, D.C. (2.4 percent) and Los Angeles (1.6 percent), according to a recent Yardi Matrix multifamily outlook.

Office overtakes hotels as preferred target for residential conversions

The number of future units from office conversions more than tripled since 2022. The largest jump was from 2022 to 2023, when it grew from 23,100 to 45,200 units. Office-to-residential was by far the fastest-growing type of adaptive reuse. While last year hotel conversions were on top, office overtook it at the start of this year, with a share of 42 percent out of the total.

With another difficult year in the cards for the office sector, stakeholders will continue to look for innovative solutions to reduce exposure. At the end of 2024, the national office vacancy rate stood at 19.8 percent, which was a 150-basis-point increase over 12 months, according to CommercialEdge.

Federal and local governments are bound to continue assessing the potential of policies in support of office reutilization, be they conversions to residential or something else. In time, these could very well accelerate the rate at which new housing is created. It's probably no coincidence that the cities with the most units underway in office-to-residential projects have all implemented or are about to implement incentives meant to speed things up.

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