From office parks to apartments. A new study from shows that 45,000 conversions for 2023 are underway across the country.

Its known as adaptive reuse. With work-from-home remaining a popular option after the pandemic, office conversions are anticipated to lead the way in the future, according to the study.

The 45,000 units represent 37% of the new 122,000 projected apartments. Hotel conversions account for 23% of future projects and factory conversions come in at 14%.

Already, more than 11,000 of the 45,000 upcoming apartments are under construction. 

New York is predicted to ride the office adaptive reuse wave in the coming years, with 2,609 apartments expected to be created through conversion. Chicago and Cleveland are expected to convert 2,500 and 1,847 units, respectively. Dallas and Houston round up the top five with around 1,500 apartments each in former office buildings.

Some buildings can be redeveloped at current market demand and some can’t, said Kent Gardner, retired chief economist at the Center for Governmental Research. 

With work-from-home trends continuing, commercial real estate in the United States will see a slow recovery and office values are unlikely to regain their peaks even by 2040, according to an economist with Capital Economics


SEE MORE: Median home prices dropped in June. Is the market shifting?

 The reduction in office demand due to remote work will cause a hit to net operating incomes on a par with, or worse than, that experienced by malls over the last six years, Kiran Raichura wrote in a report. And in line with the experience of malls, the structural nature of this hit to demand means the 35% plunge in office values were forecasting by end-2025 is unlikely to be recovered even by 2040.

Raichura said the recovery could take longer than the 15 years that economists predicted, perhaps into the mid-2040s. 

The commercial real estate sector is facing stress due to higher mortgage interest rates and banks tightening credit. Along with the lackluster demand, landlords could face defaults. Asset ownership is always risky, Gardner said. 

If you own cash, you risk inflation. If you own stocks, you are exposed to the vicissitudes of the market.  Commercial real estate looked more stable than other assets–guess not, he said.

The ripple effects through other sectors that depended on those seemingly stable returns will also be considerable, Gardner added. The cost of insurance will rise as insurers have always been heavily invested in real estate.    

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