National Housing Market Outlook

Office-to-Residential Conversions⁠: How to Capitalize on the $45B Stimulus

Deana Vidal photo

Deana Vidal

January 26, 2024

Co-authored by Eli Gilbert

Sponsors and investors now have access to $45 billion for office-to-residential (O2R) conversions. With the federal government’s recent stimulus for O2R conversions, interest in financing, designing, developing, and converting commercial buildings to residential uses has surged. Three themes keep surfacing in our research on the subject:

  1. Financial incentives and economic conditions make now the best time in history to explore conversion opportunities.

  2. Certain building types and locations are better suited for conversions. 

  3. The financial stakes are enormous. Due diligence of costs and revenues for office-to-residential projects demands thorough analyses.

Our Consulting team can inform the conversion process as early as the design phase by providing unit mixes and sizes most needed by the market.

There’s never been a better time to explore conversion opportunities.

Thanks to a decade of low interest rates and favorable demand metrics, multifamily completions have risen since the pandemic. According to the latest U.S. Census data, multifamily completions are up +20% YOY in 2023, creating what many believe is a supply glut for new apartments. However, most US markets are working through this peak period of new deliveries as the credit markets stay seized up, and the tide is beginning to turn. New multifamily starts have dipped 1% year over year, and new apartment starts will drop by 27% in 2024 and a further 5% in 2025—to roughly half of current levels.¹

This slowdown in construction and growing demand for housing will likely produce a gap in the market for new units in the coming years. An increase in office-to-residential conversion projects could help fill this gap. The federal programs to buoy conversion activity have come at a perfect time. Well played, Fed, well played.

A few standout opportunities in the Commercial to Residential Federal Resources Guidebook include HUD’s Community Development Block Grants, DOT’s below-market loan programs, and initiatives allowing the transfer of properties at no cost for affordable housing development. Read more about our take on these federal programs here.

Certain building types and locations work better than others. 

The shape of a building, structural and mechanical configuration, circulation patterns, and other physical characteristics all influence the viability of the conversion to residential units. Shorter floor plate depth and higher ceilings are often more favorable conditions. Still, the small details (inoperable windows, for example) can also make creating a desirable living environment more challenging and costly.

In addition to the physical design considerations, other factors (such as egress and fire code) affect the conversion cost, which ranges from $100 to $500 per square foot.²,³  Developers must also navigate the re-zoning and permitting processes, which are often challenging, time-consuming, and expensive. Municipality regulations vary greatly across the nation as well.

Due diligence on office-to-residential projects is critical.

In dozens of academic articles on the viability of office-to-residential conversions, little attention has been paid to post-construction consumer demand and revenue. The potential residential units and revenue derived from these conversions are critical parts of the calculus. These factors should be evaluated as carefully as the costs and ability to secure the permits to convert.

Our experience evaluating the market feasibility of thousands of rental communities over the years has shown us dramatic differences in rental demand by market. Also, decisions on housing products and associated rents must be evaluated locally, meaning block by block. The history, culture, demographics, and complementary retail and entertainment venues weigh heavily on prospective tenants’ perceived value and how much they would be willing to pay to live in a new home.

Here are some of the things we do when evaluating office-to-residential opportunities:

  • Go deep into local demographics to understand the life stages and incomes of people living in the area and who are likely to rent at the location.
  • Tour all comparable buildings and speak with local leasing agents about who lives in the area and why they choose to live there (i.e., what is driving housing decisions).
  • Closely examine the small details that can generate additional revenues, such as view premiums, proximity to great public transit, retail, and entertainment. As astute developers and investors know, nickels count and can make or break the economic feasibility of new development.
  • Leverage our consumer surveys. We regularly conduct consumer surveys to understand better what they want in their next home and community.

These extra steps and investment in the due diligence process can generate the best ROI analysis before investing millions into a conversion project. Our consulting team uses our national footprint to help building owners and investors understand all aspects of revenue components associated with office conversion projects.

Additional resources

At JBREC’s 2023 Rental Communities Summit, Ken Perlman moderated a session called Opportunities to Convert Offices to Rental Housing. He discussed office-to-residential conversions with Will Rice, Managing Director⁠ – Investment Management at Hines, and Zak Klinvex, Chief Investment Officer at Post Brothers. If you’d like access to this recording or want to talk to one of our experts, please get in touch with us here.

Source References:

¹ Source: JLL, “2023 United States Office Outlook”, page 12

² Source: SPUR, “Office-to-Residential Conversion in San Francisco’s Changing Real Estate Market”

³ Source:, “Does Office to Residential Conversion Make Sense?”

Building Market Intelligence™

Every week, we deliver analysis to over 40,000 subscribers with our Building Market Intelligence™ newsletter. Subscribe to our weekly BMI newsletters to stay current on pressing topics in the housing industry.

About The Author

Deana Vidal photo
Deana Vidal
Director, Brand Strategy
Deana applies consumer insights and design trends into practical applications to help clients make decisions about their communities and companies. She is also a brand awareness advocate who enjoys public speaking, innovation, and taking on odd assignments and unique client requests.

Contact Us

If you have any questions about our services or if you would like to speak to one of our experts about we can help your business, please contact Client Relations at

Products and Services Mentioned

green check icon

Real Estate Consulting

Our experienced team of consultants helps clients make sound housing investment decisions. We thrive on their success and work with many clients over multiple years and numerous projects.
green check icon

Research Membership

Our research services enable our clients to gauge housing market conditions and better align their business and strategic investments in the housing industry. We provide a thoughtful and unique holistic approach of both quantitative and qualitative analysis to help clients make informed housing investment decisions.
green check icon

Metro and Regional Housing Package

This package provides a complete picture of housing supply, demand, and affordability through local insight, proprietary surveys, and extensive data analysis. We currently provide an overview of major housing and economic trends across 100 MSAs nationwide.

Latest Insights

NHTI Industry Pulse: $40K for a Gym Membership?
Dear Consultant: Can people still afford homes with high rates and increased inflation, or are they more likely to rent? 
Hillwood Communities and the Art and Science of Placemaking