ETI Blog

The office-to-residential conversion pipeline has seen year-over-year growth as a result of post-pandemic workplace shifts and the push for more housing. While ground-up multifamily construction projects have generally seen an overall decline in development, conversion projects are reaching record numbers and opening new opportunities for developers and property managers to repurpose aging, available office space. 

In 2022, 21,300 converted units entered the market in what appeared to be a peak, but three years later, the pace shows no sign of slowing with 71,000 units slated for conversion this year. Recent reports show that Chicago’s metro area is at the center of it all, ranking fourth among urban hubs for 3,606 conversions currently underway, a 28% increase from last year. 

The City of Chicago has played an active role in this surge of redevelopment. They’ve been instrumental in launching programs that support adaptive reuse projects to revive pockets of the city that have seen high vacancy rates in recent years. Currently, at least 11 properties are in the pipeline to be adapted into apartments, including ongoing efforts to convert the La Salle Street office buildings to residential living space, along with conversion projects in Fulton Market and River North, which are expected to bring thousands of new apartments to the city. 

At a 24.8% office vacancy rate, there’s still a sizable inventory in Chicago for potential conversions. The city ranks just behind New York as one of the top big cities for conversion-feasible space, with over 11 million square feet of Tier 1 space and 29 million square feet of Tier 2 space. CommercialEdge indexes these buildings using criteria such as age, layout, dimensions and access to light to determine which properties are more likely to work well as residential space and which ones could be more challenging.

What Makes a Good Conversion (and What Doesn’t)?

Location, physical profile and cost are the most important factors in determining whether a conversion is possible. Like most real estate properties, location is a primary driver of income potential and long-term viability, which becomes especially critical when conversions can cost as much, if not more, than ground-up multifamily construction. The payback period then must be strong enough to cover that upfront investment.

The real determinant is the bones of the building. While some invite reinvention, others reveal their limits quickly. 

Floor Plate and Layout

The layout of the building can make or break a conversion. Apartments need shorter distances from the center of the building to the exterior walls so that units can have access to natural light, emergency egress requirements and existing building systems such as HVAC, stairwells and elevators and plumbing. Rectangular footprints under 14,000 square feet are typically best, but larger buildings can also work if they’re shaped as an “H” or an “L.”

Building Form and Placement

Where the building sits on the block also matters. A building with more sides open to the street or set back from neighbors will usually adapt better, since it allows more windows and ventilation. But a blinder-style building that’s squeezed in between taller buildings might not perform as well, regardless of how the interiors are laid out. 

Age and Ceiling Height

Experience has also shown us that older buildings tend to be more adaptable. Properties built between the 1950s-1980s have a smaller footprint and higher floor-to-floor ratios, which give more flexibility for building systems and create specs that make conversions more cost-efficient. 

What Do Office Conversions Offer Residents?

Office-to-residential conversions bring new energy to parts of the city that once went quiet after 5 o’clock. A building that used to sit empty at night, or one that is now vacant, can provide much-needed housing and new commercial opportunities in mixed-use spaces, adding activity and foot traffic to areas of the city that need it most. 

As residents prioritize amenity spaces and health and wellness, developers are taking the opportunity to create amenity-rich conversions that fit modern city living. Rooftop gardens, bike storage, co-working areas, coffee bars and fitness centers are high on residents’ wish lists, and many multifamily construction projects are increasingly weaving them in as standard features. 

In addition to livability, many conversions emphasize sustainability and preservation. Repurposing existing structures reduces construction waste and carbon impact compared to starting new, while maintaining the architectural character that shapes a city’s skyline. For residents, this balance of modern amenities with historic charm creates a stronger sense of place and connection to the community.

How Can Property Managers Guide a Successful Conversion?

Conversions can be a big undertaking for property managers. Preparing to go from managing a professional office building to overseeing dozens, possibly hundreds, of homes and shared amenities can present a number of challenges, from navigating code compliance and coordinating with multifamily contractors to planning amenity spaces and managing leases. To navigate the conversion effectively, property managers should consider the following strategies.

• Start with due diligence. Understanding the building’s current conditions, such as mechanical systems, fire safety feature, and accessibility, provides a roadmap for what’s feasible and where investments will be needed.

• Keep residents in mind. Unlike office tenants, residents live in the building around the clock. Planning for natural light, safety, parcel delivery and amenities builds long-term satisfaction and reduces turnover.

• Partner with the right experts. Conversions succeed when managers, contractors, architects and engineers collaborate from the start. Early alignment ensures that resident-focused goals translate into designs and construction plans that work in practice, stay in budget and get delivered on time.

• Leverage technology. From smart building systems to leasing platforms and resident communication tools, technology can simplify operations and create a smoother living experience.

• Think long term. Incorporating sustainability measures like energy-efficient systems, durable finishes and water-saving fixtures will reduce operating costs and enhance appeal for residents who value wellness and environmental responsibility.