Dive Brief:
- Of all the property types getting the adaptive reuse treatment, hotel-to-apartment has taken the biggest leap ahead, making up over one-third of all new converted multifamily units delivered in 2023, according to a report from RentCafe.
- Adaptive reuse deliveries are on the rebound, up 17.6% YOY to 12,713 in 2023. Hotel conversions — such as ArtHaus Jack London in Oakland, California — make up the largest share of deliveries at 4,556 units, up by over 1,000 from the previous year. Office conversions came in second at 3,587. This marks the first time in 11 years that more apartments have been converted from hotels than from offices.
- Over 151,000 adaptive reuse units are in various stages of development — up 24% from 122,000 projected units in 2022. Offices still make up a majority of the conversion pipeline at 38.5%, or 58,000. Hospitality conversions come in second at 34,000.
Dive Insight:
Following hotels and offices, factory conversions made up the next largest slice of apartment deliveries at 1,954, or 15% of the total — up 31.6% from 2022. Warehouses made up 9% of the total at 1,098 — a 128.8% jump from the previous year.
New York City’s Manhattan saw the bulk of adaptive reuse deliveries in 2023, with 733 new units, every one converted from a former hotel. The majority of these apartments came from 525 Lexington Ave, which is now a 655-unit student property.
Manhattan now holds 5.8% of all conversions in the country, with 4,363 more units in the works — the second-highest pipeline in the country, following Los Angeles with 5,881 units in progress.
Cities with the most converted apartments in 2023
| City | Converted apartment deliveries |
|---|---|
| Manhattan, New York City | 733 |
| Richmond, Virginia | 662 |
| Alameda, California | 372 |
| Charlotte, North Carolina | 351 |
| Cincinnati | 342 |
| Lawrence, Massachusetts | 338 |
| Albuquerque, New Mexico | 300 |
| Denver | 300 |
| Peachtree Corners, Georgia | 295 |
| Cleveland | 282 |
SOURCE: RentCafe
The surge in hotel-to-multifamily conversions is connected to the challenges and changes facing the hospitality sector, according to RentCafe. The pandemic not only led to a drop in travel, but created a “flight to quality,” leaving older or outdated hotel properties struggling.
The majority of hotel-to-multifamily conversion projects — 60% — came from class B hotels in 2023. Class A and class C hotels accounted for 21% and 18% of projects, respectively.
Since these structures are already equipped with plumbing and electrical infrastructure, they offer redevelopers a faster and more cost-effective way to create new housing, compared to other methods.
As environmental and sustainability concerns permeate the apartment sector, adaptive reuse stands out as a sustainable means to create new housing, according to Doug Ressler, manager of business intelligence at Yardi Matrix, owner of RentCafe.
“The process minimizes the environmental impact associated with demolition and the production of new materials, making it an eco-friendly approach to design and construction,” he said.
