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Nirit Cohen – WorkFutures
Angela Howard – Culture Expert
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Jonathan Price – CRE & Flex Expert
For the first time in over two decades, more U.S. office space is expected to be repurposed or demolished than built new, according to CBRE.
CoStar News reports that the commercial real estate firm projects that 23.3 million square feet of office space across 58 major U.S. markets will be either demolished or converted to other uses by the end of 2025. In comparison, developers are forecast to complete just 12.7 million square feet of new office space during the same period.
CBRE says this could help ease the nation’s office vacancy rate, which is currently close to its highest level on record at 19%.
Julie Whelan, CBRE’s head of occupier research for the Americas, called the trend a clear inflection point in the office sector. She said while future activity may vary, the near-term outlook points to conversions and demolitions continuing to exceed new development due to limited construction in the pipeline.
Both new builds and conversions are being held back by high interest rates, rising construction costs, and overall market uncertainty. Even so, the appeal of upgraded, modern space continues to push older buildings out of the leasing market.
CBRE found that nearly two-thirds of all current conversion activity is located in central business districts. Whelan said downtown areas are shifting toward mixed-use development, as cities aim to bring more retail, restaurants, and housing to their cores.
However, buildings suitable for adaptive reuse may become scarcer. Construction and financing costs remain elevated, and tariffs are adding pressure on larger projects.
In Walnut Creek, California, developer High Street Residential has proposed replacing an outdated office property with 400 apartment units. According to Phil Mobley of CoStar, such conversion projects can be expensive and are still relatively uncommon, but they can significantly impact localized markets.
CBRE’s data shows Dallas-Fort Worth ranks fifth nationally in office space conversion volume, with 4.4 million square feet underway. The region leads in central business district conversions, driven by projects like The National and The Sinclair, which have repurposed aging towers into luxury apartments, hotel rooms, and high-end office space.
Nationally, Manhattan tops the list with 10.3 million square feet of office conversions, followed by Washington, D.C., with 9.2 million, Houston with 6.7 million, and Chicago with 4.8 million. Cleveland leads all markets in the percentage of its total office inventory undergoing conversion.
The overall supply of new office construction has declined sharply since before the pandemic. Completions fell from 51.2 million square feet in 2018 to 25 million in 2024, according to CBRE. The firm also estimates that 81 million square feet of office space could be converted in future years.
Apartments remain the dominant use for former office properties. About 76% of current conversions are being developed into residential units. Hotels account for 8%, while industrial and life sciences projects make up smaller portions. Another 10% fall into other categories.
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Since 2016, roughly 33,000 apartment and condo units have been created through office conversions, with another 43,500 planned. Jessica Morin, CBRE’s head of office research in the Americas, said these projects will not solve the national housing shortage, but they will offer local relief while removing obsolete office inventory.
