Executive Summary

• Office-to-multifamily (OTM) conversions is a popular topic in the media, but rare, and unlikely to impact the bottom line of either sector. OTM conversions made up approximately 1% of multifamily deliveries over the past 20 years.
   
• Despite a wide gap between office and multifamily vacancy rates, OTM conversions are only slightly up, and there’s no evidence they’ve significantly increased.
   
• Construction costs and regulations on residential construction will continue to limit conversions to smaller, older office properties—whose floor plates make for an easier conversion—in markets with either high multifamily demand or government incentives aimed at historic restoration.
   
• Though we expect OTM conversions to remain rare, there are high-demand multifamily markets in the West with untapped conversion potential due to a relatively large amount of smaller, older office buildings.