Cities Are Betting on Office-to-Apartment Conversions to Fix Two Problems at Once

Office vacancy rates in many downtown business districts remain well above pre-pandemic levels years after remote work first took hold, and cities are increasingly betting on residential conversions to fill the gap.

Office vacancy rates in many major downtown districts remain elevated well above pre-pandemic norms, as hybrid and remote work arrangements have proven far stickier than many employers initially expected. Owners of older office buildings, in particular, have struggled to attract tenants who increasingly prefer newer, more amenity-rich space, leaving a meaningful share of downtown office stock effectively obsolete for its original purpose.

Cities facing both a housing shortage and a struggling downtown office market have increasingly turned to a solution that addresses both problems at once: converting vacant office towers into residential apartments, often with tax incentives designed to make the conversion financially viable.

Not every office building can be converted

Conversion is far from a universal fix. Older buildings with the right floor plate depth, window access, and structural layout convert relatively well, but many modern office towers were built with deep floor plates optimized for open-plan work space, making it structurally difficult or prohibitively expensive to carve out apartments with adequate natural light.

“The buildings that convert easily are usually the older ones. The newer towers that are actually struggling the most are often the hardest to convert at all.”

Even where conversions are feasible, the economics remain tight, requiring substantial subsidy or tax incentive in most cases to pencil out. Cities pursuing the strategy generally describe it as a partial solution rather than a complete fix for either their office vacancy problem or their housing shortage.