Conversion of old buildings into apartments is now a real “thing.” Hotels, offices, factories, warehouses, all are fair game if they meet the necessary conditions. In 2023, 12,713 new apartments emerged into new life from dormant structures, and 151,000 new ones are in the process of conversion – up 24% from the 122,000 projected in 2022.
“While office conversions are the darlings of future adaptive reuse projects, it was hotel conversions that stole the show in 2023,” RentCafe reported in a new study. Repurposed hotels gave rise to 4,556 new apartment units – an all-time high and up 38.8% from the previous year. Class B hotels accounted for 60% of these conversions, followed by Class A (21%) and Class C (18%).
The pandemic, which caused a flight to quality, placed a financial burden on outdated hotels that not only lost customers but also faced high debt service costs. However, they still had assets that developers seized on. “Because hotels already come equipped with essential infrastructure (such as plumbing and electrical systems), these adaptive reuse projects offer a faster and often more cost-effective method to create housing units, particularly in dense, urban areas where space for new construction is scarce or pricey,” the report noted.
New York City became a prime example. With 733 apartments carved out of old hotels, Manhattan holds 5.8% of all converted apartments in the U.S. However, a single building at 525 Lexington Ave. yielded 655 of them, providing housing for students. Albuquerque was another hot spot, converting hotels into 300 apartments, as part of the city’s broader adaptive reuse initiative.
Hotel conversions were also active in two Florida cities, Hialeah and Ruskin, as well as in Richmond, VA, Overland Park, KS, Sterling Heights, MI, Richland, WA, Las Vegas, and Salt Lake City.
In 2023, 3,587 apartments emerged from office buildings, making up 28% of all conversions. Thirteen of them involved Class A and 12 Class B offices. The 2023 conversion of 5672 Peachtree Parkway in Peachtree Corners, a suburb of Atlanta, offers an example. Thoroughly modernized and updated, the project consists of 295 apartments with a fitness center, saltwater pool, and clubroom, as well as a second floor offering private offices, conference rooms, a co-working space, and the latest technology. Milwaukee and Indianapolis also made “significant strides” in office to apartment conversions, as did Alexandria, VA, Cleveland, Rochester, NY, Birmingham, Chicago, Lansing, and Richmond.
“Get ready for more than 58,000 future apartments from former office buildings — a whopping 38.5% of all upcoming conversions, reflecting a growing trend,” the report urged.
Outdated factories were also turned into 1,954 apartments, 15% of the total rental conversions nationwide, while warehouses – including one outside Oakland, CA that was carved into 372 new apartments — accounted for 9% with a 129% surge in conversions.
Conversions of all types have not reached the peaks seen in 2016 and 2017. But that could be about to change. The top 10 cities of the future, according to RentCafe, are Los Angeles, Manhattan, Chicago, Philadelphia, Washington, DC, Dallas, Cleveland, Baltimore, Detroit, and Kansas City, MO.
Source: “Hotel Conversions Reach All-Time High“
