Office Buildings Are Turning Into Apartments – And It’s Happening Faster Than Expected

Written by:

Alejandra Rodriguez

Date:

28 Apr 2026

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For years, converting empty office towers into apartments was more theory than reality. The costs rarely made sense: gutting interiors, overhauling plumbing, and navigating complex zoning, all while land and labor expenses climbed. Most developers avoided these projects, opting instead for new construction or other asset classes.

Now, the equation has changed. As office building values have dropped sharply and demand for affordable housing keeps rising, conversions that once seemed impossible are moving ahead in cities across the country.

“We’re finding that with the loss of value of certain office properties, conversion is now feasible,” says Doug Ressler, Director of Business Intelligence at Yardi Matrix, a commercial real estate data firm. Ressler and his team analyze which buildings can realistically be converted into apartments and which cannot.

Why the Math Finally Works

The main reason conversions are taking off is the steep drop in office property values. In many markets, buying and converting an older office building now costs less than developing a new apartment building from scratch. While material and labor costs remain high, the acquisition price for struggling office towers has fallen, sometimes by 30% or more.

At the same time, the rise of hybrid work continues to keep office utilization rates low. Even companies mandating more in-office days are not seeing their buildings fully occupied. As a result, many landlords are left with half-empty properties that no longer produce reliable income.

“Hybrid work is continuing, even though some companies say they’re going full-time,” Ressler explains. “That doesn’t mean people are in the building eight or nine hours a day.”

With fewer tenants and falling rents, office owners have limited options: hold onto a depreciating asset, sell at a loss, or pursue a residential conversion. Increasingly, more are choosing the last path.

What Makes a Building Convertible

Not every office building can be converted into housing. Yardi Matrix uses a “conversion configuration” analysis — an architectural review of a building’s floor plates, window placement, plumbing cores, and ceiling heights.

Buildings with narrow, shallow floor plates and plenty of natural light are generally the best candidates. Wide, deep floors with central cores are much harder to adapt, since apartments require windows and ventilation in every unit. Older office buildings, often constructed before the drive for maximum floor efficiency, sometimes have layouts better suited for residential uses.

Zoning and permitting are also critical. Some cities, especially those with high downtown office vacancies and strong housing demand, have streamlined the approval process for these conversions. This makes it easier and faster for developers to move forward.

Where It’s Happening

Most conversion activity is concentrated in urban cores. Gen Z renters — primarily ages 20 to 28 — are drawn to walkable downtowns with social amenities and transit access. This makes city-center conversions appealing to both developers and tenants, even as some millennials and families look to the suburbs for more space.

This trend is partly driven by a mismatch that dates back to the 2008 financial crisis. After that downturn, developers slowed the construction of single-family homes, but demand kept rising. The result is a persistent shortage of affordable housing, especially in cities.

In 2024 and 2025, the multifamily sector saw a surge, with over 500,000 new rental units coming online nationwide. Still, this was not enough to close the housing gap. With higher interest rates making new construction more expensive and risky, developers are increasingly turning to conversions as a faster and sometimes cheaper way to add much-needed housing.

What This Means for Renters and Buyers

For renters, the wave of office-to-apartment conversions means more options in downtown areas that have struggled with high vacancy since the pandemic. As new multifamily supply has increased, rents in many markets have softened, giving tenants more leverage when negotiating lease terms.

For buyers looking for affordable homes, conversions are not a silver bullet — most projects are rentals rather than condos or for-sale units. However, by increasing the overall housing supply, these conversions relieve some pressure on prices and make it easier for renters to find suitable apartments.

Small investors and landlords should also take note. Office buildings that seemed like liabilities just a few years ago may now offer new potential, provided their layouts and locations are suitable for residential use.

The Bottom Line

Office-to-residential conversions have moved from a fringe concept to a practical solution for both landlords and cities facing high office vacancies and ongoing housing shortages. The drop in office values has tipped the financial balance, making many conversions viable for the first time in decades.

Not every building is a candidate, and successful projects depend on careful analysis of each property’s structure, market demand, and local regulations. But for those who do qualify, conversions are helping to fill a housing gap that has been growing for over ten years.

As Ressler notes, the key is knowing which buildings can adapt and which can’t. For the right properties, what was once a stranded asset may now become a vital part of the urban housing solution.

About the Expert: Doug Ressler is Director of Business Intelligence at Yardi Matrix, a division of Yardi Systems that provides data on commercial real estate asset classes, including multifamily, office, industrial, student housing, and self-storage. His work focuses on analyzing nationwide trends in occupancy, development, and investment.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.