Office to Residential: A Solution
for Adaptive Reuse of Corporate Spaces


In the fourth quarter of 2023, the Biden Administration stirred excitement in the multifamily industry by unveiling a White House Announcement. This release introduced additional resources and financing options, aiming to facilitate the conversion of office and commercial buildings into multifamily residences.

The overarching goal is to establish affordable, energy-efficient housing conveniently located near transit hubs. The federal government is actively involved in this initiative, including the production of a Guidebook to assist in converting high-vacancy commercial buildings into residential spaces, addressing the need for affordable, energy-efficient housing accessible to transit and employment centers. HUD’s Office of Policy Development and Research (PD&R) also produces comprehensive information, including the latest Evidence Matters knowledge-based publication.

Despite skepticism from some quarters about the practicality, feasibility, or difficulty of converting commercial to residential use, it’s essential to note that the Department of Housing and Urban Development (HUD) has successfully executed such conversions for nearly two decades. The Multifamily Accelerated Process (MAP) guide and the Section 220 and 221(d4) mortgage insurance programs have been instrumental in facilitating the adaptive reuse of commercial properties for years.

Low angle view of skyscrapers in the Financial District of New York, USA - Image

Curious about our involvement, I recently delved into D3G’s project files to discover our long-standing support for this type of adaptive reuse. Our records at D3G reveal participation in over 100 projects, integrating LIHTC, HTC, and HUD financing to transform vacant offices, hospitality venues, schools, and industrial buildings. These structures have found new life after conversion to residential, in most cases as affordable or workforce housing. 

While finding commercial buildings meeting the conversion criteria remains challenging, Office-to-Residential conversions represent a noteworthy contribution to the housing landscape. Although these projects may not single-handedly solve the housing crisis, they contribute to a more comprehensive approach and often catalyze significant downtown economic revitalization. 

Acknowledging the inherent challenges, such as higher costs and design complexities arising from the fundamental differences between office and residential spaces, these conversions typically incur costs ranging from $150 to $500 per square foot, contingent on specific design details. The surge in remote work triggered by the COVID-19 pandemic has prompted a shift in workforce dynamics, with employees favoring home offices over traditional commercial spaces. However, the increased demand for multifamily units alone may not fully justify the cost of commercial conversion. Using historic tax credits, low-income housing tax credits, and HOME funds often needs to be improved, especially as gaps in development capital stacks continue to grow.

Two workers wearing hardhats standing in big empty hall of new building looking at construction plan, extreme long shot

The Biden Administration introduced new tools to foster office-to-residential conversions in response to these challenges. These include:

- Community Development Block Grants (CDBG): Allocating $10 billion to grant funding supporting acquisition and rehabilitation for converting commercial properties to residential uses.

- Below-market interest rate loans: Leveraging Department of Transportation (DOT) sources under the Build America Bureau and the TIFIA/ RRIF Transit Oriented Development (TOD) funding for economic development projects, encompassing commercial and residential developments and with infrastructure.

- Inflationary Reduction Act (IRA) funds: Allocated for the green economy under the EPA and DOE. Notable programs for commercial-to-residential conversions include the EPA programs of Solar for All ($7B) and the National Clean Investment Fund ($14B).

To add a lighthearted touch, not all office/commercial conversions need to be for residential. We have seen locations repurposed as pickleball centers, climbing gyms, and some locations where commercial-to-agricultural conversions are explored. Agriplay, a trailblazer in vertical farming, is developing technology to transform vacant office spaces into profitable cultivation areas for up to 150 crops catering to local markets. 

Now that’s innovative!

– Rob