In the seventh episode of “The Inside Look,” Senior Commercial Real Estate Economist Xander Snyder discusses how office-to-apartment conversions will impact apartment supply.
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Transcript:
Hi, Zander Snyder here. This is an Inside Look at First American. A recent report from Rent Cafe released the latest estimates on the number of apartment units slated to be converted from office buildings this year. At first glance, that seems like a lot. So, take a look. From 2021 to 2024, the number of apartments slated to be converted from office space has more than quadrupled, from 12,000 units to 55,000 units.
Now, that's rapid growth, but what does this growth tell us about the impact of office conversions on apartment supply overall? Not much. To answer that, we need to know what proportion of new supply these 55,000 conversions represent. According to the Census Bureau's New Housing Construction Report, there are nearly 1 million apartments under construction as of December 2023, near an all-time high.
So, in comparison to this new new development supply, the 55,000 units from office to apartment conversions only represent about 5% of the total new supply. Now, in terms of overall size, i.e., the apartment stock that already exists, this 1 million new new development units will increase the apartment stock by about 4%.
In contrast, the conversion of 55,000 offices to apartments would increase apartment inventory by only about 0.2 percent — not a huge increase and not enough to fundamentally change the national supply and demand dynamics for multifamily housing.
I will be speaking about the current state of the commercial real estate economy at ALTA’s Commercial Network Conference in New Orleans at the end of February, so please join me!
Thank you for joining us, and we'll see you on the next episode of The Inside Look.