
An office vacancy challenge exacerbated by the Covid 19 outbreak seems to be slowly correcting itself, according to a new report issued by CRBE, the real estate services company in Dallas.
The company is reporting that office conversion projects have enjoyed a “banner year to date in 2024,” with 73 such projects having seen completion and another 30 scheduled for delivery before December 31.
Such statistics, says the report, Strong Office Conversion Pipeline Will Boost Business-Centric Downtowns, represent the greatest number of such projects since CRBE started to track this sector in 2016.
As of the fall of this year, around 71 million square feet of the country’s office inventory was “planned for or already undergoing conversion.”
Because those 71 million square feet are roughly equal to where things stood at the beginning of this year, it appears that the “conversion pipeline is replenishing as projects are finished.”
In a trend seen from coast to coast, the “demand for multi-family units, particularly in tight downtown housing markets, has motivated developers to convert largely vacant office buildings.”
That a nexus is perhaps being reached between two trends previously thought to be unrelated is seen in the fact that the downtown multi-family vacancy rate was down to 5.3% as of the third quarter of this year, while the vacancy rate for offices was just under 20%.
Of all the office conversion projects as of the third quarter of this year, a strong 74% saw such space repurposed as residential, while 8% were turned into hotel space and 4% used for industrial purposes.
The CRBE report also notes that office-to-residential conversions have had the effect of transforming “certain neighborhoods into thriving economic centers where people want to gather.”
The trend presents alluring fortunes for both developers and investors: “Largely vacant older properties within or adjacent to existing vibrant mixed-use districts,” are seen as particularly good candidates for conversion.
According to a variety of sources, office conversion projects this year have been particularly notable in New York, Chicago, Dallas, Denver, Phoenix, and Los Angeles.
November 21, 2024
By Garry Boulard
Photo Courtesy of Pixabay