CBRE: Strong Office Conversion Pipeline Will Boost Downtowns

(Illustration courtesy of CBRE)

CBRE, Dallas, said office conversions have had a great 2024, with 73 completed and another 30 scheduled for delivery by year-end–the most since the firm began tracking conversion projects eight years ago.

“Much of this activity is being driven by historically high office vacancy rates and falling asset values, prompting public/private partnerships that are incentivizing conversions,” CBRE said in a Research Brief. “The pipeline of office conversions is expected to grow as cities offer more incentives and sellers of troubled assets further discount prices, particularly for older buildings.” 

The report said 71 million square feet or 1.7% of U.S. office inventory was planned for or already undergoing conversion as of the third quarter. “This is the same amount of conversion activity as in Q1 2024, despite the completion of 45 projects totaling 7 million square feet since then—an indication that the conversion pipeline is replenishing as projects are finished,” CBRE noted.

Office-to-multifamily accounted for nearly three-quarters of planned or underway conversion projects in the third quarter, up from 63% in the first quarter, CBRE said. Office-to-multifamily conversions have increased U.S. multifamily supply by 28,000 units since 2016 and an additional 38,000 will be added if all projects currently planned are completed.

Since 2020, 42% of completed office conversion projects and 52% of currently planned or underway conversions were in “business-centric” districts, the report said. “As office demand shifts away from these areas, a resultant increase in conversion activity should eventually transform them into new vibrant mixed-use districts,” CBRE said.