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Can Office to Multi-Family Conversions Solve the Rental Housing Shortage

Many areas throughout the United States are experiencing a rental housing shortage. Investors and housing authorities must work together to find solutions to reduce the shortage. One idea is to convert unused offices into multi-family housing. Is this a good idea? First, let’s go over some causes of the rental housing shortage and potential solutions to the problem. 


The Pandemic Effect of Housing

When the COVID-19 pandemic hit, many people started working from home instead of going to the office. With social distancing, work-from-home orders, and the lingering fear of getting sick, more and more people are stuck to the work-from-home lifestyle. 

Although the work-from-home transition happened two years ago now, many people have decided that returning to the office isn’t exactly necessary. After all, most desk jobs can easily be done at home, saving workers a commute and allowing for more freedom when it comes to living outside the city. As a result, the transition left many office buildings vacant. 

As more people are staying home and inflation takes over, another problem presents itself: an affordable housing crisis and rental housing shortage. With more people looking for housing and nowhere for them to go, investors and Washington DC property managers are looking for solutions to the problem. 

With an abundance of unused office buildings, would it be a good move to convert them to multi-family housing solutions? Let’s discuss more below.

Is Converting Unused Office Space to Multi-family Housing a Good Move?

We know that more people are working from home now than in the past, leaving office buildings more vacant than usual. However, the future of in-office work is still unknown since many businesses now offer remote or hybrid work styles. Therefore, it may take a couple of years to determine office needs. 

In the meantime, we must figure out solutions for the rental housing shortage. For example, can we convert unused office buildings to more residential housing solutions? 

Unfortunately, the solution isn’t that simple. With converting unused office space, there are several considerations. For example, it’s going to cost a decent amount of money to complete renovations and remodels to vacant office buildings. However, there are also some advantages to the situation. So, let’s dive deeper into the pros and cons of converting unused office space to rental housing. 

Pros of Converting Office Space

The most apparent advantage of office to multi-family conversions is more housing. There’s no denying that there’s a serious housing shortage that needs to be taken care of. Well, converting offices to housing can create many opportunities close to jobs, retail, and public transportation.


Commercial buildings are also great investments. Multi-family construction is booming, and builders look for projects with larger profit margins. Additionally, when converted to multi-family rental housing, investors can expand their portfolios and generate more significant profits. Converting these buildings can create better opportunities for renters and investors. 

We can’t rely on building single-family rentals to solve the housing shortage. After all, with labor shortages, material costs, and zoning restrictions, it can be difficult and time-consuming to build new housing. So instead, investors and housing authorities must outsource to find solutions. 

Now, let’s go over some of the disadvantages of converting office buildings to multi-family rental housing. 

Cons of Converting Office Space

The main disadvantage of office-to-rental housing is money. Building costs are rising, and there are several differences between rental and vacancy rates in office buildings compared to rentals. For example, in some major cities, Class B office rents are higher than Class A rents, making the conversion less desirable for investors. 

In addition to the differences in rental and vacancy rates, zoning regulations may increase project costs or discourage conversions. Another aspect to look at is the configuration of these office buildings. 

Many office buildings aren’t created the same as multi-family buildings would be. For instance, if you have an office shaped like a large square without windows, builders will have to find a way to add natural lighting to the space. Additionally, the location of elevators, HVACs, and other building systems can significantly impact the functionality of apartments. 

Solutions That Could Work to Solve the Rental Housing Shortage

There isn’t necessarily a solid solution to rental housing shortages. However, a mix of ideas can help bridge the gap. After all, just converting office buildings to apartments won’t solve the overwhelming lack of rental housing. Instead, investors, developers, and government officials must work together to find reasonable solutions. 

Some cities have provided innovative tax incentives and relief for conversions. For instance, in larger cities like Los Angeles, some programs incentivize developers to convert old buildings to rentals by offering faster entitlements and reduced development fees. 

Developers and investors need to determine what type of buildings can work for conversions. You can’t feasibly turn every commercial property into residential housing. For instance, Class B and Class C office buildings would work best for conversions since the floor plans are smaller and less costly than Class A offices. However, a recent report by RentCafe proves that conversions do work. According to their report, a record number of 20,100 apartment conversions were done in 2021, with 41% of converted apartments in old office buildings. 

So far, Philadelphia and Washington DC have converted the most units in 2020 and 2021, with larger cities to follow suit this year. This proves that conversion does work as a reasonable solution to the rental housing shortage. However, there are some challenges to face. 


Cost and Zoning Considerations for Investors

Converting office spaces into residential housing isn’t very cost-effective. In some cases, converting commercial buildings could cost more money than building new multi-family housing. As such, conversions are generally more viable in suburban and emerging markets than in core markets. In Washington DC, rents are still high enough for office spaces that it would be difficult to obtain these buildings for residential purposes. 

Additionally, in Washington DC, residential and commercial buildings have different zoning restrictions. Zoning codes allow for more residential density than commercial, and changes could lead to some areas remaining unused in a residential building. However, it provides opportunities for mixed-use buildings. 

Overall, converting office buildings to multi-family housing is complicated but not impossible. Although these projects have extra considerations, they can be a solid solution to the rental housing shortage in some areas of the United States. 

Protect Your Investment With Property Management

The past couple of years can be easily described with one word–unprecedented. But, although you can’t control the state of the world, you can control the state of your rental properties. With property management, you can feel confident your rentals are well-maintained and taken care of. 

Whether you own one property or several, Bay Property Management Group helps you get the best returns on your investments. Our dedicated professionals work hard to manage your rentals while you control and retain ownership of all your properties. 

Bay Property Management Group offers comprehensive rental management services, including tenant screening, maintenance, rent collection, and more. Contact BMG today if you need management in Baltimore, Philadelphia, Northern Virginia, or Washington DC.