Office-to-residential conversions are one of the buzziest trends in real estate. They also aren’t the most popular housing conversions in the country.
Hotels held the crown last year for the most popular type of housing conversion, Fast Company reported. The takeaway comes from a recent RentCafe report that looked at adaptive reuse projects across the nation.
Hotel properties accounted for 37 percent of housing conversions last year, according to the report. Office properties were a distant second at 24 percent, followed by industrial properties at 19 percent.
There are several reasons hotels have become more ripe for housing conversions than office properties, which were left struggling after the onset of the pandemic.
First, there’s the design aspect. Office buildings don’t always have the necessary windows and utilities to easily make for a multifamily property, meaning owners would need to invest more money to bring the properties up to code. Hotels, on the other hand, already resemble multifamily properties in many ways, making for a more seamless transition.
Additionally, hotel owners have been facing their own economic challenges, as inflation and rising costs bite into the consumer travel budget. Operating costs are rising faster than revenue, according to a report from the American Hotel & Lodging Association. This is likely another reason why more hotels are being converted into other uses.
Office buildings, too, were the symbol of distress in the immediate aftermath of the pandemic and many remain troubled or dragged down by declining values.
Among the notable hotel conversions is Isaac Hera’s project at the Watson Hotel in Manhattan’s Hell’s Kitchen neighborhood. Over the summer, Yellowstone Real Estate Investments filed plans to transform the 600-key hotel into a 249-unit apartment building.
Overall, nearly 25,000 converted units were completed last year, according to RentCafe. That’s a 50 percent jump from the previous year and there’s plenty more room to grow with roughly 181,000 units in the conversion pipeline nationwide.
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