This article is part of the 2025 Mid-Year Housing Industry Update. Click here to read the full newsletter.
Across the United States, empty office buildings have become a common sight. According to Moody's Analytics, office vacancies are at their highest since the 1990s. The COVID hangover has left us with an abundance of vacant or mostly vacant office buildings in cities and towns across the nation. At the same time, the country is experiencing an ongoing housing shortage due to years of failing to meet demand.
The solution seems obvious: convert the empty office buildings into apartments. It is not so easy, however, and much has been written about the challenges of office to residential conversion. The practical challenges include adapting structures for safety standards, deep floor plates that make it difficult to bring in sunlight, immovable load-bearing walls, the need to install proper ventilation systems for air circulation, and ensuring that accessibility requirements are met. Still, many developers have successfully converted office buildings into apartments with the help of creative architects, skilled engineers, and in some cases, the government.
The vast majority of office to residential conversions have taken place in downtown areas or areas adjacent to the city core—not in the suburbs. This article explores the key reasons for that disparity.
The first reason, as is often the case in real estate, is location. Office buildings located in high-density city areas are typically near stores, public transportation, restaurants, and entertainment venues. In essence, the "neighborhood" already exists. A suburban office park, with buildings surrounded by parking fields, is not as attractive for residential use because it lacks proximity to these features. While amenities can be added, such as fitness rooms and accessory retail, it is difficult to compete with an established neighborhood offering a broader mix of easily accessible options.
The second reason is zoning. The majority of zoning codes, in both large cities and small towns, follow a basic principle: only one type of use (e.g., residential, commercial, industrial) is permitted in a particular area. Larger cities, however, are more likely to include mixed-use zoning districts in their zoning codes. Philadelphia is a good example, where a building in a mixed-use district could be used for either offices or apartments. Without mixed-use districts, an office to residential conversion would require a change in the zoning district or a use variance—often a lengthy and costly proposition with no guarantee of success.
The third reason is the greater availability of government incentives, which can play a critical role. Compared to the suburbs, cities more often provide incentives to support adaptive reuse, such as density bonuses and local tax abatements. Many cities across the country have provided specific incentives for office to residential conversion. For example, earlier this year the Seattle City Council passed legislation allowing for the deferral of sales and use taxes on construction costs for eligible projects. Suburban municipalities, by contrast, are generally less able to provide the same level of incentives because they rely more heavily on their commercial tax base, making them less inclined to support conversions that could reduce their revenue base. This trend may shift, however, as the tax assessments on vacant office buildings get challenged.
While conversion of suburban office buildings to apartments is possible, and is being done in some areas, it remains more challenging due to these factors. Still, as the stock of urban buildings suitable for conversion is depleted and the housing shortage continues, we are likely to see more creative solutions emerge to make suburban conversions both feasible for developers and more attractive to residents—whether through creative financing, public-private partnerships, or updates to zoning and planning practices.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
