- A record number of more than 20,100 apartment conversions are to be finalized in 2021, a total of 32,000 in the first two years of the decade.
- 41% of apartments are in former office buildings, accelerating a trend that began in the 2010s.
- Philadelphia and Washington, D.C. have converted the most units in 2020 and 2021 combined, while Los Angeles and Cleveland have the most projects lined up beginning in 2022.
When we picture a growing city, most of us focus on the new: the latest designs and continuous innovation. Conversely, when we think about what gives a city character, we think of just the opposite: timeless architecture and the stories we grew up with. At this intersection lies adaptive reuse — a sustainable option for resuscitating older buildings and converting them into rental apartments.
For instance, by the end of this year, approximately 20,100 units in older buildings (that previously served other purposes) will be starting a new life as apartments — that’s almost double the number of apartments converted in 2020 and 2019 combined. So far, through adaptive reuse alone, this new decade has already created nearly 32,000 apartments, 41% of which are in former office buildings.
Specifically, former offices comprise one-quarter of future projects in which more than 52,700 units are expected to become available in 2022. That’s 12,300 rental apartments in the pipeline to match the 13,250 that have already been converted in the last two years. Notably, work-from-home arrangements that came as a result of the pandemic also spurred office transformations nationwide, although these weren’t as abundant as hotel redevelopments in the wake of the hospitality industry crisis.
So, while the 2010s put residential adaptive reuse on the map, we dug into Yardi Matrix data to see what the 2020s have in store.
32,000 Apartments Converted at Start of Decade
The turn of the decade began with around 11,800 converted apartments being delivered in 2020 — double the number of units adapted in 2010. And, because an estimated 20,100 more will have entered the market by year end, it’s easy to see why investors and developers are increasingly taking the conversion approach in a more climate-aware society.
“Perhaps the most compelling reason to choose adaptive reuse for apartments versus new apartment construction is the lower environmental impact, especially if demolition is involved,” said Emil E. Malizia, PhD, CRE, of the Department of City & Regional Planning, UNC at Chapel Hill. “Adaptive reuse mitigates climate change; demolition and new construction do not.”
Former hospital, courtesy of The Marine Residence at Historic French Fort in Memphis, TN
Adapting a structure rather than building a new one from scratch can also prove to be cost-effective — as well as save the time required for site acquisition and public reviews. “One estimate could be that renovations could cost about 30-40% less than new construction for the same number of units,” Malizia said. “Total development cost per unit should be less as long as the cost of the site and building is not significantly more expensive than the cost of site acquisition for new construction.”
Despite a challenging turn of the decade, some areas have still managed to convert a considerable number of apartments. More precisely, the cities that have delivered the most units through conversion projects since the start of the decade are Philadelphia, Washington, D.C. and Cleveland. These history-rich areas have seen numerous conversion projects in the past — and it looks like they’re planning to keep up the tradition.
First up, Philadelphia has redeveloped more than 1,850 apartments since 2020 by repurposing office buildings, schools, an 1840s hospital and — in true Philly fashion — warehouses and factories. Among them is Brush Factory Lofts, which doesn’t shy away from the chic industrial style it was devised in back in 1926 when it was, you guessed it, a brush factory. This just goes to show that Philadelphia still has its share of historical buildings just waiting to be rediscovered.
Not to be outdone, Washington, D.C. has converted former office buildings, hotels and even a historic military hospital to create more than 1,750 new units. And as far as fresh finishes and waterfront views go, it’s hard to find nicer apartment communities in D.C. than Boathouse, which was originally the Howard Johnson Hotel, then a dormitory for George Washington University students.
Another city that gravitates toward adaptive reuse is Cleveland, OH, which had six buildings transformed and 1,200 new units since 2020. Here, architectural staples like The Athlon at the Cleveland Athletic Club or The May — once one of the most beautiful shopping centers in the city — have managed to keep their turn-of-the-century charm even after all these years.
Former department store, The May in Cleveland, OH, courtesy of RentCafe
Demand for Urban Rentals Makes Offices the Decade’s Most Popular Conversion Yet
Office conversions in the 2020s have skyrocketed as they maintain their 2010s popularity. Until last decade, old hotels were all the rage in adaptive reuse — due, in part, to their existing floorplans and utilities that were already fit for residential use. However, consistent urban demand and increased preference for open-plan layouts and out-of-the-box designs revealed the housing potential in non-residential buildings. As a result, this led to underused or abandoned office buildings becoming increasingly popular for conversions in the 2010s — a trend that only skyrocketed at the beginning of the 2020s.
Former hosiery knitting factory, May Hosiery Lofts in Burlington, NC, courtesy of Evan Jones at The Dynamic Lens
And, while interest in other types of buildings wavers, office conversions are thriving: 41% of all rental apartments transformed in the first two years of this decade are located in former office buildings, adding more than 13,250 new apartments to the market. Other popular structures to be converted are factories and hotels, despite being far behind offices with just 4,350 and 3,900 units, respectively. Examples include May Hosiery Lofts, an early 20th-century hosiery knitting mill located in Burlington, NC — a town once known for its dominance in the industry — or Cityplace, which was once a quaint inn right in the heart of Allentown, PA.
“Office buildings have become the most frequent type of building to be converted since 2010, even though they are more costly to convert than hotels,” Malizia, PhD said. “This outcome can be attributed to their ample supply in urban locations where demand has been strong.”
When it comes to office redevelopments, Washington, D.C. climbs to the top of the ladder. Since 2020, the nation’s capital has converted nearly 1,100 units by transforming three office buildings. A standout among them is The Wray, which was previously occupied by the State Department since the beginning of World War II and now displays 158 wonderful units behind its historic façade.
Former office building, courtesy of The Wray in Washington, D.C.
Not far behind, Chicago is nipping at D.C.’s heels with 1,020 converted apartments in former office buildings. One successful example is Millennium On LaSalle, a 1960s structure that still fits picture-perfect downtown Chicago like a glove. This illustrates the fact that part of what makes adaptive reuse projects so attractive is that the old buildings remain part of the existing architectural fabric, while completely reinventing themselves at the same time.
To the east, a big surprise comes from Alexandria, VA, which managed to create 955 new units through office conversions. Built in the ’60s, what’s now known as The Foundry soon became one of the most sought-after apartment communities in the city, leasing 520 apartments.
Check out other cities that managed to stay on top of office conversions at the start of this decade:
52,700 Units to Be Converted Starting 2022, a Quarter in Office Buildings
Residential conversion flourished during the first two years of this decade — and the near future appears to be just as promising. Looking at adaptive reuse projects for 2022 and beyond, Yardi Matrix data shows a total of 306 future redevelopment projects that are planning to create more than 52,700 apartments. These include projects currently under conversion that are scheduled to be completed in 2022 and later, as well as projects that are still in the process of approval or in the planning stages. As the pandemic is propelling the work-from-home trend more and more, this might be just a glimpse of what’s ahead in the next few years.
Here again, office buildings rise to the top. One-quarter of the conversion projects in the pipeline are located in former offices and will result in more than 12,300 apartments. One such example is the Mayer Building, the stunning Los Angeles landmark that is expected to create 79 affordable apartments.
However, this Art Deco gem is just one of the city’s upcoming office projects. In fact, LA prides itself on having the highest number of future residential conversions overall, with more than 4,300 apartments set to be redeveloped as of 2022. Another future project is the notorious Cecil Hotel which recently reached world fame due to it being featured in a popular Netflix documentary. The building is expected to be a mix of hotel and apartment building, housing a total of 290 units.
In the Midwest, Cleveland, OH and St. Louis, MO are a bit behind in future unit numbers. Even so, they still make the podium with more than 1,600 each. Among them are Cleveland staples like The Rockefeller Building (dating back to the early 1900s) as well as the much-anticipated revival of Jefferson Arms Hotel in St. Louis, which had previously stood abandoned for years.
Check out the cities with the most apartments set to undergo conversion beginning next year:
Hotels Most Common Type of Conversion Initiated During Pandemic
In the backdrop of the pandemic-fueled hospitality industry crisis of 2020-2021, developers and investors have turned their attention to hotel-to-apartment conversions.
So, we investigated which types of buildings filed for redevelopment during 2020 and 2021 — in other words, which conversion projects were initiated during the pandemic. In our analysis, we found that of the 86 projects initiated in 2020 and 2021, hotels dominated the list (30%). Furthermore, of the nearly 14,000 apartments pertaining to these projects, more than 4,000 were in former hotels, 2,350 were in offices, and 2,300 were in factories. For example, the revamping of the former Americana Hotel in Arlington, VA, began in 2020 after having closed, in part, because of the hospitality industry crisis.
- RentCafe is a nationwide apartment search website that enables renters to easily find apartments and houses for rent throughout the United States. Apartment data was provided by our sister company, Yardi Matrix.
- Adaptive reuse refers to repurposing an existing building. This study is exclusively based on apartment data related to buildings containing 50 or more units.
- 2021 estimations include completed units through July 2021, as well as projects scheduled to be finalized by the end of the year. Actual conversion completion is subject to change.
- Future projects include projects that are under construction, to be completed in 2022 and after, as well as planned and prospective redevelopments.
- Yardi Matrix defines completed buildings as those that have received a certification of occupancy, while those under construction have yet to receive it or are currently being developed. Planned projects are actively engaged in the redevelopment approval process, while prospective redevelopments hold lower status in probability of completion because they remain subject to entitlement approvals.
- Cover image courtesy of The Press/321, a former office building in Detroit, MI. All building photos are used with expressed permission from the respective property management. RentCafe does not grant the right for further property image use.