- Developers have converted more old buildings for rent than ever before in 2020-2021.
- Developers target different types of buildings, from office buildings to churches.
- Increasing telecommuting and hybrid opportunities are driving the trend.
According to a new report from RentCafe, developers are converting old buildings into new apartments as working from home becomes permanent.
Between 2020 and 2021, developers have created a total of 28,000 new apartments from older and underutilized buildings, the report said. This represents a 25% increase over the 22,300 apartment developers converted between 2018 and 2019 before the pandemic.
The study analyzed conversions for buildings containing at least 50 apartments and used market data from RentCafe’s sister company, Yardi Matrix.
“Not all buildings are equally threatened by the telecommuting revolution,” Doug Ressler, business intelligence manager at Yardi Matrix, said in a statement. are better suited for repurposing than smaller office buildings, which are often scattered in suburban areas.”
These types of transformations (also known as adaptive reuse) came into fashion during the pandemic. Rising interest rates and construction material pricesAs the pandemic enters its third winter, developers are looking to repurposing housing as a way to “revive office buildings” and meet rising housing demand, according to the report.
Large cities such as Philadelphia, Cleveland, and Pittsburgh are hotbeds for such conversion projects because of their many old buildings and unused office space, the report adds. Overall, the developer has converted more than 3,200 apartments in these cities, or 11% of his nationwide total, the report says.
Local governments are lagging behind this trend by creating incentives for conversion projects.For example, California Governor Gavin Newsom announced in his late September that developers circumvent local regulations Building houses on commercial land under certain circumstances. City planners in Chicago also said he introduced the initiative in September. Convert vacant office space along LaSalle Street In a residential unit in the central business district.
“The housing market needs much more density in metropolitan areas where demand is highest and where the tallest office buildings are located,” Ressler said.
According to the report, developers aren’t just looking to convert offices, with warehouses, hotels and factories accounting for 37.3% of the building types being converted.
Emily Hubbard co-founded Sage Investment Group, a multifamily renovation and repurposing real estate investment firm. told an insider in September Conversion projects are attractive because they can be completed in a short period of time and are often cheaper than building from scratch.
Sage recently spent $14.2 million to acquire the Econo Lodge and Travel Lodge in Tacoma, Washington, with the goal of converting extended-stay hotels into low-income housing. To other conversion projects in Sage’s portfolio.
A RentCafe report estimates that over 77,000 apartments will be completed after 2022, with hotels accounting for 22% of the total.
Hubbard adds that the need for housing across the country will also continue to spur demand for conversions.
“It’s at the forefront of everyone’s mind,” she said.