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Office-residential projects dominate adaptive reuse in California

Office-to-residential conversion currently dominates reuse projects across the Golden State, and Los Angeles is on track to become the nation's hotspot for commercial-to-residential conversion.

Of the nearly 14,000 commercial property-to-residence projects completed in the state last year, 31 percent converted offices to apartments, the Commercial Observer reported, citing Rentcafe's annual Adaptive Reuse Report, which processes figures from Yardi Matrix.

Developers are currently converting unused offices into 4,306 apartments for local residents.

At the same time, the conversion of hotels into residential buildings ranks second, followed by healthcare, retail and a mixed category of warehouses, factories and religious buildings.

Last year, 3,752 apartments were created through hotel conversions, accounting for 21 percent of government conversion projects, followed by 2,358 healthcare facility conversions to residential buildings, accounting for 17 percent, and 1,540 retail store conversions to residential buildings, accounting for 11 percent.

Doug Ressler of Yardi Matrix (Head of Multifamily)

Various projects, including warehouses, factories and religious buildings, rounded out the remaining 14 percent of the state.

“Overall, the movement toward converting underused commercial space into residential units is a significant trend in California's real estate landscape, driven by the need for more housing and the changing dynamics of workspaces post-pandemic,” Doug Ressler, manager of business intelligence at Yardi Matrix, told the Observer in an email.

According to the Rentcafe report, hotel-to-residential conversion projects nationwide are at an all-time high. Last year, 4,556 apartments were converted from buildings. From coast to coast, developers converted 3,587 offices into apartments.

In California, conversion projects boomed in 2019 and 2020, but then slowed in 2021 and 2022, the report said. There was an increase last year, with 17.6 percent more apartments than in 2022.

Thanks to an expanded adaptive reuse ordinance, Los Angeles is now on track to become a national leader in converting commercial buildings to residential space.

According to a study by the RAND Group, Los Angeles County could create up to 113,000 housing units by converting 2,300 unused hotels, offices and other commercial buildings.

Last year, only 182 apartments were converted in Los Angeles, converted from three military buildings, but the report ranks LA as the top 20 cities for future apartment conversions, with 5,881 units planned.

However, fewer than 2,000 of these will be offices. The nature of the city's other conversion projects is unclear.

Leading developers in the conversion space include Koreatown-based Jamison Services, which this year filed plans to convert the 19-story Los Angeles Superior Court Tower into 428 apartments at 600 South Commonwealth Avenue.

— Dana Bartholomew

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