Dive Brief:
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The conversion of vacant downtown office buildings to apartments and condos is making a comeback as large numbers of millennials continue to move to cities.
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A twist: The more young adults who move into central business districts, the more companies follow — and they need office space, according to a report this week by CoStar.
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Because so many outmoded office buildings are being converted to residences, the market for newly constructed work space has re-emerged.
Dive Insight:
This sort of paradox has occurred before, but mostly in large, East Coast downtowns like Manhattan. This time, however, office-to-residential conversions are occurring in markets like Kansas City, St. Louis, Milwaukee and Cleveland, according to CoStar.
In fact, CoStar analysts found that office-to-residential conversion is occurring in half of the central business districts in the country — to the tune of 11,500 new, multifamily units nationwide.
“Office conversions are a huge trend we’re seeing in a lot of places you wouldn’t think about,” said Aaron Jodka, CoStar’s senior manager of market analytics.
The conversions are adding multifamily inventory to cities with extremely low apartment vacancy rates, the report noted. At the same time, they are refurbishing older, eyesore buildings and spurring construction of state-of-the-art offices.