Office conversions are hardly a silver bullet. They only work in locations where rules are flexible and incentives are there to help the numbers line up – especially now that the pool of viable buildings is shrinking and costs have climbed.
How do you know if sites are ideal for office conversion development?
Full conversion potential depends on many factors, but light, layout, and location matter the most. Older, rectangular buildings, with small to mid-sized floorplates and shallow floor depths work best for residential conversions, while walkability, parking, and access to public transit all add to the appeal.
But sometimes, the truest and best identifier will simply come down to dollars and cents – the ROI expected from the property and bottom-line impacts.
Where are developers finding the greatest rates of success?
Conversions have been most successful in cities that have positioned themselves as pro-development, with streamlined processes, supportive regulations, and targeted incentives. In many cases, a broader mix of uses offers a more sustainable path forward than programs that solely focus on office-to-residential conversions.
What can this look like, ideally?
Read on to learn the policies, incentives, and processes shaping three successful office conversion markets: Washington, D.C., Dallas, Texas, and Calgary, Alberta.
From vacancy to viability: How three top cities are making it work
Class B and C buildings make up around 30% of office vacancies in D.C.
Asset Values
Since 2023, properties have been trading at roughly 50% below their previous price
Flight-to-quality is fueling high vacancy rates in class B and C assets.
Population growth
Corporate relocations drive strong population growth and demand for housing.
Decade-long downturn
The office market has not recovered since the 2014-15 oil crash, with consistently high vacancies and low asset prices.Population growth
Calgary (and Alberta as a whole) have the fastest growing population in Canada due to positive interprovincial migration.
CLASS B/C OFFICE AVAILABILITY BY MARKET
Source: Avison Young Market Intelligence
20-year tax abatement; recently expanded to include Georgetown and Mt. Vernon Triangle.
Office-to-Anything
15-year tax freeze.
More Housing N.O.W in Montgomery County
Zoning amendments and 20-year tax abatement with projects that meet affordability requirements.
Adaptive Reuse Policy (Arlington County)
Cuts entitlement from 12 months to around 4-5 months.
Texas historic tax credit
25-year tax credit
for buildings that are at least 50 years old.
Tax Increment Financing (TIF)
Funds the redevelopment of underperforming areas using future tax revenues.
Senate Bill 840
Grants by-right zoning flexibility in commercial corridors, with only limited restrictions allowed by municipalities.
Downtown Calgary Development Incentive Program
The city offers C$75 per square foot, and up to C$15 million per office conversion. Eligible uses include residential, co-living, hotels, schools, and arts centers.
Permissive regulatory environment
In downtown, most buildings don’t require a change-of-use permit, helping developers save time and reduce costs; Necessary approvals are fast-tracked.
Large portions of D.C. face design review, adding time and cost; Height of Building Acts limits commercial buildings to 130 feet.
Tenant purchase law (TOPA) Gives renters the first right to buy, slows sales, but pending reform may exempt newer buildings.
Multifamily rent premiums
With construction costs largely uniform across D.C., feasibility depends on rent premiums. Submarkets like the West End and Dupont generate the higher rents needed to achieve yield-on-cost thresholds, while others fall short.
Suburban cities are resisting SB 840, with some pursuing lawsuits to block by-right multifamily conversions.
Office boom in the 1980s
A significant portion of Dallas’ office stock is 40 years old, built with large floorplates and an inadequate parking ratio.
Downtown skyscrapers
Large-scale adaptive-reuse projects, with some reaching 1.5 million square feet (msf), require complex financing packages, stacking tax credits, loans, bonds, and grants.
Many landlords lack expertise or appetite for conversions, choosing office upgrades over government-backed incentives.
Cost efficiency
Conversions typically cost 75-80% of building new and are faster to execute.
Amenity constraints
Amenities may be fewer than in purpose-built residential buildings, affecting value and marketability.
2,446,498 msf converted to a new use.
Number of offices eligible for MF conversion
10,586,034 msf meet the basic conversion criteria of being built before 1990 and having a floor plate of under 30,000 sf with an availability of over 35%.
2,175,533 msf converted to a new use.
Number of offices eligible for MF conversion
12,724,670 msf meet the basic conversion criteria.
15 buildings totaling 2 msf converted to multifamily or hotel (14% of class B and C inventory downtown).
Number of offices eligible for MF conversion
Another 1.8 msf is under consideration for conversion.
CONVERSION ACTIVITY BY MARKET
Source: Avison Young Market Intelligence
Since 2018, 2.4 msf have been converted, and 6.2 msf are in the pipeline, totaling about 5% of the city’s office inventory.
Including Georgetown in HID unlocked the redevelopment of 31% of its pre-pandemic office stock.
Economic and social
Conversions have been catalytic in turning Downtown D.C. into a mixed-use hub.
Converted buildings are trading at the same cap rate as purpose-built multifamily assets.
Removing outdated class B/C space helped ease office vacancy, while competition for trophy assets is spurring updates to remaining class B stock.
Economic and social
Downtown is becoming more walkable, safer, and better connected.
National developers are attracted by downtown’s strong performance, with occupancy around 90% and rents of $2.25–$4 psf in converted luxury apartments like The Sinclair.
As the oil and gas sector continues to downsize, conversions and a lack of new office development are helping restore balance.
Economic and social
For the first time in 15 years, the inner city is seeing a real residential boom. Downtown, once dependent on oil and gas, is becoming more diverse and vibrant, as new mixed-income housing, schools, and hotels reshape the core.
Since 2022, assessed downtown property values have increased by $1.8 billion.
Joe French, Vice President,
Capital Markets Group
Susan Gwin Burks, Senior Vice President, Capital Markets Group
Walsh Mannas, Principal, Capital Markets Group, Calgary
From red tape to green lights: government policy’s role in office development
Whether it’s tax abatements, expedited approval processes, or zoning flexibility, municipalities that signal a clear green light to developers will be far better positioned to help their cities transform empty offices into vibrant buildings.
Calgary, Dallas, and D.C. demonstrate that a diverse mix of strategies is crucial for successful conversion projects. Aligning incentives with market realities can make challenging projects feasible and attract developers, proving that it can be a powerful tool for reviving cities.
Breathing new life into the city core? That’s where real estate can help lead a true renaissance.
Reach out to our experts to learn more about how to make the most of this opportunity.
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Stephen Silverstein
Principal, Managing Director, US Studio, Project & Construction Management
New Jersey
Construction Management, Project Management
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