Adaptive-reuse multifamily developments are on the rise, according to new research from RentCafe. Last year, 17.6% more apartments were converted from outdated buildings compared with 2022, generating 12,713 new units.
RentCafe’s analysis of Yardi Matrix data finds that the adaptive-reuse trend will be sticking around for a while, with 151,000 apartments in various stages of conversion, a 24% increase from 2022’s 122,000 projected units. This includes approximately 40,000 units that are underway. Former offices are leading the charge for future conversions, with over 58,000 units in the works and 38.5% of all adaptive-reuse projects. Repurposed hotels come in at 22.5% of the share and about 34,000 units, followed by factory conversions at 11.8% share and almost 18,000 apartments.
While office conversions may be today’s hot topic, hotel conversions accounted for 36% of adaptive-reuse projects in 2023. At an all-time high, 4,556 apartments were created from former hotels, a 38.8% increase from 2022 and almost double what was seen in 2021. According to RentCafe, the majority of the units, 60%, came from Class B hotels, while Class A and C hotels comprised 21% and 18% of the share, respectively.
Underutilized office buildings followed close behind hotels, making up 28% of all adaptive-reuse projects in 2023. Developers created 3,587 apartments from former office buildings, up 3.8% from 2022. However, last year’s total was a 17% decrease from 2021 and a 45% drop from the all-time high in 2020.
Outdated factories and warehouses round out the list. Factories comprised 15% of the share of adaptive-reuse projects last year, producing 1,954 apartments. This is up 31.6% year over year; however, it is significantly down from the peak of 3,153 units completed in 2019. Warehouse conversions saw a 128.8% surge last year, with 1,098 repurposed units and accounting for 9% of all adaptive-reuse projects.
New York City’s Manhattan borough led the nation in apartment conversions in 2023, passing Los Angeles, which experienced a slowdown. Manhattan had 733 apartments added to its housing stock—all through hotel conversions. In addition, according to RentCafe, one specific project made up the bulk of the total. A former hotel building at 525 Lexington Ave. that ceased operations in 2020, almost 100 years after it was built, was converted into 655 apartments for students.
Richmond, Virginia, and Alameda, California, came in second and third, respectively. Richmond saw 662 apartments created through adaptive reuse. Approximately 30% came from the transformation of the historic Model Tobacco Factory. Alameda, an island just outside of Oakland, had 372 apartments created through a warehouse conversion.
