Adaptive Spaces

Office Conversions: A Second Chance for Underutilized Space

With long-term forecasts calling for structurally higher office vacancy, owners of properties that don’t appeal to modern tenants may want to explore office conversions today.

December 2, 2022 6 Minute Read



Looking for a PDF of this content?

Owners of older office buildings without the amenities that today’s tenants need to lure their employees back to the workplace may be better off converting them to other uses.

The pandemic-induced rise of remote work has lowered office demand and occupancy rates. The national office vacancy rate reached a nearly 30-year-high of 17.1% in Q3 2022 and sublease availabilities are rising as occupiers attempt to shed underutilized office space. A surplus of available office space will continue to weigh on fundamentals for the foreseeable future.

Today’s office tenants expect more of their buildings in terms of quality, design, location and sustainability. Many are reducing their total space and moving into the most modern, amenity-laden buildings. Class A space built since 2010 accounts for only 9.2% of the nation’s total office inventory and not all that space can be truly defined a quality building. Older buildings with outdated configurations and designs are being left behind. What happens to them? Owners can either keep the building as is and further lower rents to attract tenants, sell the property likely at a discount to better-situated buildings or use the structure or land for a different purpose through demolition or conversion.

U.S. Office Conversions Analyzer

Explore and compare markets to find the locations that best meet your office conversion needs

*Manhattan office-to-multifamily conversions before 2022 were excluded from the data set due to the removal of incentives that changed the landscape for local conversions.

More Office Conversions on the Horizon

While office conversions to other uses have become increasingly attractive options for older, less competitive buildings, completed projects haven't significantly increased since the pandemic. CBRE tracked an average of 39 completed conversions annually between 2017 and 2021.

Figure 1: Office Conversions by Construction Status and Estimated Year of Completion


Source: CBRE Research, Q4 2022.

But more conversions are on the horizon: Some 42 office conversions have been completed so far this year and 217 are either underway or planned. Of the underway projects, 21 are slated to deliver by the end of the year. However, underway projects may stall due to tighter financial conditions amid slower economic growth, particularly in H1 2023. Despite the robust pipeline, conversions alone won't measurably decrease the surplus supply. Even if every planned office conversion is completed, together with the conversions completed since 2016, only 91.1 million sq. ft. would be removed from the market, roughly 2% of total U.S. office inventory.

Conversions are concentrated in coastal and northeast markets with relatively older office stock. San Diego, Boston, Manhattan, Cleveland and Philadelphia have the most completed conversions since 2016. Boston and San Francisco Peninsula have the most underway. Dallas has several planned and announced projects totaling nearly 6 million sq. ft.


Multifamily has been the most common reuse for outdated office buildings. Since 2016, CBRE tracked 89 completed office-to-multifamily (OTM) conversions across 26 major U.S. office markets.* The projects collectively reduced office inventory by 16.4 million sq. ft. and added over 14,000 apartment units. Record-low apartment vacancies and sustained, elevated rent growth have made OTM conversions attractive to opportunistic developers. The U.S. multifamily vacancy rate was 3.9% in Q3 2022, and average rents increased 10.4% to $2,143/month.

Figure 2: Office & Multifamily Fundamentals in Major U.S. Markets


*Office reflects Manhattan market data
Source: CBRE Econometric Advisors, Q3 2022.

Conversions are especially attractive in dense markets with limited available land. OTM conversions are most prevalent in downtown areas, particularly in walkable neighborhoods with abundant amenities. Since 2016, several downtown offices in Cleveland, Pittsburgh, Cincinnati, Kansas City, and Philadelphia have been converted. Several OTM projects are in various stages in Washington, D.C., downtown Dallas, and Northern Virginia. Five Downtown Dallas OTM conversions planned within a half-mile radius would delete 5.9 million sq. ft. of office space while adding over 1,300 apartment units.

The average age of the 89 properties converted is 80 years old and they average 184,400 sq. ft. About 90% of the conversions were constructed before 1980. Buildings erected before 1980 account for 30% of U.S. office inventory and have an average vacancy rate of 17%, making them prime candidates for future conversions.

Amid concerns over U.S. housing supply, office conversions are bridging the gap between housing supply and demand. They have brought much-needed residential options to important high-density neighborhoods with barriers to new development.
Matt VanceSenior Director Multifamily Research, CBRE

Case Study: Office to Multifamily Conversion, 1801 N Beauregard, Alexandria, VA

Project Overview:

Urban Investment Partners (UIP) recently acquired a 132,000 sq. ft. suburban office building in Alexandria, VA, which they plan to convert into 112 apartment units. Once completed, the apartment complex will include state-of-the-art amenities in a park-like setting. The project’s superior location—proximate to Amazon HQ2, Landmark Mall and Inova Health Complex—are expected to command initial rents of $2,414. The estimated cost of conversion is $213 per sq. ft., compared to an estimated $275 per sq. ft. to build new construction.




Similar to multifamily conversions, office-to-hotel conversions require significant capital to add more plumbing, HVAC, light, kitchens, bathrooms and finishes. Additionally, zoning variance approval may be required when changing from a commercial to residential use.

CBRE tracked 45 completed office-to-hotel conversions since 2016, with seven underway and seven planned. All but a handful of conversions are in downtown markets and within close proximity to walkable amenities, prominent employers, sports and entertainment attractions, convention centers and restaurants. Multiple conversions have been delivered, or are under construction, in downtown Cincinnati, Houston and Kansas City over the past few years.

Case Study: Office to Hotel Conversion, 602 Main St, Cincinnati, OH

Project Overview:

A historic downtown Cincinnati office building that previously served as Procter & Gamble Co.'s headquarters is being converted to a luxury boutique hotel. Developer NuovoRE purchased the building in 2019 for $5.6 million when the 1913-vintage multi-tenant office was 55% occupied.1 The estimated cost of the conversion is $81.5 million. The project, located along the Cincinnati Bell Connector streetcar line, received $5 million in historic tax credits to facilitate the conversion.


1 “EXCLUSIVE: $53M conversion to high-end hotel planned for former P&G HQ”, Cincinnati Business Courier, October 2019.

Many recent office-to-hotel (OTH) conversions involve tax incentives or are part of a mixed-use property repositioning strategy. Future OTH conversions will be harder to justify, given the increase in construction and financing costs and the strong correlation between office visitation and business travel demand.
Rachael RothmanHead of Hotels Research & Data Analytics, CBRE

Life Sciences

Life sciences is a specialty office type, with unique conversion costs and challenges. Yet, these conversions have become increasingly attractive over the past few years due to record-high rents for lab and R&D facilities and weaker demand for traditional office space. Strong demand for life sciences space and limited new supply has propelled the upswing in conversions, especially in Boston, Philadelphia, San Diego, San Francisco and suburban Maryland, where demand for life sciences buildings have been insulated from the impact of remote work because much of its sophisticated work can only be performed within a laboratory setting.

Of the 63 conversion projects completed or slated for completion in 2022, 29 are life sciences properties. As of Q4 2022, there was 26.8 million SF of office conversion construction underway, including 11.4 million SF that would be converted to life science space. Boston, San Francisco Peninsula, and Suburban Maryland accounted for 9.3 million sq. ft. of the conversion construction reflecting persistent demand in these life sciences hubs despite the tight market.

Conversions of office space to life sciences laboratories and R&D facilities will be needed to meet growing demand over the next several years, but competition for space is also expected to increase, making it harder for some conversions to attract demand.
Ian AndersonSenior Director of Research, Life Sciences, CBRE

Life sciences tenants need robust infrastructure, making conversion to labs expensive. As of Q4 2022, life sciences fit-out costs in the top three markets ranged from $571-1,075/sq. ft., compared to $140-$275/sq. ft. for office. However, compared with residential and hotels, developers can use more components of an office building in a life sciences conversion, such as lobbies, bathrooms and elevators. Office-to-life sciences transitions require specialized building features and amenities, including higher ceilings to accommodate greater HVAC requirements, clean rooms, vivariums, increased loading docks, more security and, most costly, increased mechanical, electrical and plumbing engineering (MEP). Despite the additional costs, the payoff can be high. In 2021, average lab rents increased by 11%, whereas U.S. office rents increased by only 2%. Boston commanded average lab rates of $99.53/sq. ft. compared to $53.14/sq. ft. for Class A office in Q3 2022.

Case Study: Office-to-Life Sciences Conversion, 135 Morrisey Blvd, Boston

Project Overview

In Boston, Beacon Capital Partners and Nordblom Co. are converting the Boston Globe's former 500,000-sq. ft. headquarters into a life sciences hub in the Seaport district, dubbed Southline Boston. Nordblom acquired the property for $81 million in 2017 and the developer has invested more than $200 million in capital improvement. Keeping the building's exterior shell intact, the developer gutted the interior, creating an atrium that will connect the expected 2,000 employees who will occupy the new campus.



Source: "New investor and focus on life science as massive re-do of former Globe building hits home stretch”, Boston Globe, August 2021.

Mixed Use

Only a portion of some buildings may be undesirable to today's office tenants—such as the bottom floors of an older Class A office tower with no views and outdated amenities. For such assets, landlords might consider a partial conversion that transforms an office to a mixed-use development. In many cases, several floors of an office building have been converted to retail, life sciences, residential or other uses. An added benefit: tenants occupying the office floors may even be able to remain during a partial conversion, as work is done around them.

Case Study: Office to Mixed-Use Partial Conversion, 3 Times Square, Manhattan

Project Overview:

The Rudin family and its joint venture partner, Thomson Reuters, reached a 32-year lease agreement with Touro College to establish a 243,305-sq. ft. campus within Three Times Square. Thomson Reuters, the original anchor tenant that once had 570,000 sq ft, in the building has steadily contracted over time, leaving much of the building available for lease. The partial conversion will include a dedicated entrance and lobby for students, faculty and staff. In June 2022, the building's owners refinanced the property for $415 million to support the conversion, renovate the building's lobby, add indoor and outdoor amenities and modernize building systems.




Source: Three Times Square inks ginormous deal with university, NY Post, January 2022.
*Includes building modification and upgrades and tenant fit-out cost.

What determines if an office conversion can work?

Not every office is suitable for conversion. Several factors determine whether an office building is convertible, including the configuration, floor size, depth and ceiling height. A standard office floor is about 100-150 ft. long, while a typical apartment floor is 65-75 ft. If the building is too deep, many challenges will arise, like inadequate light and airflow for the units at the back of the building. Apartments and hotels also require windows in each room, leaving much of the interior space essentially unusable. While there are some creative solutions, like creating common space, private lockers and storage facilities, gyms and offices, or gutting the area to add light and connectivity, some floorplates are just not compatible with conversions.

Other considerations that will make or break a potential conversion are local zoning requirements and regulations, which vary across markets.

While there are many challenges to overcome, conversions have advantages over new construction:


  • Generally, less expensive than building from the ground up
  • Smaller environmental impact
  • Quicker timelines by avoiding zoning and town approvals and demolition
  • Retaining unique design features: rehabbing landmark historical buildings whose character can't be replicated in a new build
Most large institutional owners won't have the risk appetite to undergo a conversion. But there is a supply of smaller, older and well-located offices ripe for conversion, and the right pricing will attract opportunistic investors.
Mike WattsPresident, Americas Investor Leasing, CBRE

Environmental Sustainability and Social Connection

Converting obsolete offices can help occupiers and investors meet their individual environmental and social targets that have become a priority for many organizations. The reuse of existing structures cuts down on fabricating new materials, reduces the materials that need to be shipped to the site and lessens landfill waste. According to CBRE's Spring 2022 U.S. Occupier Sentiment Survey, 71% of respondents are prioritizing a reduction in greenhouse gas emissions and 49% are committed to reducing resource usage or waste. According to a National Trust for Historic Preservation report, building reuse typically offers environmental savings over demolition and new construction. Although operating more energy efficiently, new construction can take 10 to 80 years to offset the climate change impacts produced during its development.2

Figure 3: ESG Priorities


Source: CBRE 2022 U.S. Office Occupier Sentiment Survey, Q1 2022.
2“The Greenest Building: Quantifying the Environmental Value of Building Reuse,” National Trust for Historic Preservation, March 2016.

Our analysis suggests that occupiers are willing to pay a premium rent for ‘green buildings’. This reflects a growing corporate social responsibility which, combined with elevated construction costs, will translate into higher demand for conversions over the long term.
Richard BarkhamCBRE Global Chief Economist, Global Head of Research

Looking Ahead

Conversion of obsolete offices to another use is one solution that will support the recovery of U.S. office fundamentals. However, at its current pace, conversions won’t have a measurable impact on the more than 4 billion sq. ft. of existing office inventory. If the economy slips into recession as expected, office vacancies will edge higher, particularly for undesirable and outdated office space. Real estate decision-makers will explore solutions to better position underutilized office spaces. Because conversions also generate environmental and social benefits, we’ll likely see more local and federal support. To preserve property tax revenues, we could see local governments lower regulatory barriers that impede conversions and programs that incentivize the transition of unused offices to newer and better uses. The combination of compelling financial and social benefits are likely to stimulate more conversions in years to come.

Related Insights

Related Services

Insights in Your Inbox

Stay up to date on relevant trends and the latest research.