When it comes to repurposing old buildings into residential communities, Houston is poised to become one of the top cities in the country.
Throughout 2022, a total of 10,090 U.S. apartments were created by transforming unused office or retail space into residential buildings. The future of this trend seems even more promising: across the country, approximately 122,000 adaptive reuse apartments are planned, with 45,000 of these coming from office conversions.
“Office-to-multifamily conversions target smaller, older properties, yielding limited sector effects,” said Doug Ressler, senior analyst and manager of business intelligence at Yardi Matrix. “Based on the latest research, the conversion of office spaces into multifamily units will primarily be restricted to smaller, older office properties due to factors such as construction costs and regulations related to residential construction.”
According to RentCafe, Houston is one of the cities that could be home to a large number of converted apartments in the future. There are currently over 2,200 adaptive reuse projects in the city’s construction pipeline, the seventh-highest amount of any city in the country. That means the trend of repurposing old buildings has more than doubled in Houston since 2021, when only 890 adaptive reuse projects were scheduled.
Over two-thirds of these upcoming units — 1,881 apartments, to be exact — are located in downtown Houston along the 77002 zip code. Properties in this area that will soon be apartment buildings include the Houston Holiday Inn, the ExxonMobil building and Sakowitz Department Store.
Mirroring nationwide trends, offices make up the vast majority of all adaptive reuse projects in the Bayou City, with 1,353 of the converted apartments repurposed from former office spaces. Hotels are the next most common conversion, with 667 apartment units planned.
Despite the city’s lofty goals for apartment conversions, only 20% of all adaptive reuse projects in Houston’s pipeline are already under construction. There were also zero converted units in all of 2022. Only time will tell if all projected apartments will come to fruition, and that will depend on cooperation between the city and the private sector, according to Ressler.
“Creative approaches are increasingly being sought to deliver net new affordable homes — leveraging public assets, public financing tools, new legislative authorities, funding, and, importantly, more solutions with the private sector,” Ressler said. “These solutions include corporate funding and deeper alignment with traditional multifamily housing developers and investors.”
via RentCafe