Office values remain depressed across much of the country, but this is creating an opportunity for developers willing to rethink how they can transform outdated office buildings into multifamily projects, industrial space and other uses.
That’s one of the key findings from CommercialCafe’s recently released July U.S. national office report.
According to CommercialCafe, using research from Yardi Matrix, declining office property values are making office-to-multifamily conversions financially feasible in cases that would have been considered too risky just a few years ago. As more office buildings trade at steep discounts, developers are finding opportunities to offset the often-high costs of converting outdated office space into housing.
CommercialCafe reported that nearly half of all office property transactions with two or more recorded sales prices have sold at a discount since 2024. Those lower acquisition costs are helping more adaptive-reuse projects move from the drawing board to construction.
The result is a record year for office conversions. CommercialCafe said that 11.8 million square feet of office-to-multifamily projects were either completed or under construction during 2025, more than in any previous year.
Peter Kolaczynski, director of Yardi Research, told CommercialCafe that although office conversions remain expensive and technically challenging, discounted building prices are making more projects financially viable.
“Recognizing that office conversions can still be an expensive undertaking and difficult to pull off, the fact that a segment of buildings are trading at such a discount creates the opportunity for more conversions to pencil out,” Kolaczynski said in the report. “At the very least, this allows for creative solutions to be introduced on what to do with this oversupply.”
Chicago stands out as one of the strongest examples of that trend. CommercialCafe reported that nearly 60% of office building sales completed in Chicago since 2024 have been discounted. At the same time, approximately 95 million square feet of office space in the metro is considered suitable for conversion to other uses.
That combination of lower purchase prices and a large inventory of potentially convertible buildings has fueled adaptive-reuse activity in the Chicago market. CommercialCafe said those conversions have also helped keep the city’s office vacancy rate at 17.8%, almost identical to the national average of 17.7% recorded in June.
Not every market is seeing the same results. CommercialCafe pointed to Seattle as an example of a metro where conversion activity has lagged despite having many of the same ingredients. Seattle posted one of the nation’s highest office vacancy rates at 24.7% in June and has roughly 47.5 million square feet of office space considered suitable for conversion. Even so, the market has experienced relatively little adaptive reuse compared to Chicago.
Across the Midwest, office markets continue to offer some of the country’s most affordable leasing opportunities. According to CommercialCafe, Detroit posted the region’s lowest average office asking rent in June at $21.47 per square foot. The Minneapolis-St. Paul market followed with an average asking rent of $27.63 per square foot.
The Twin Cities also maintained a vacancy rate of 17.8% in June, matching Chicago and remaining close to the national average, CommercialCafe reported.
Chicago remained the Midwest’s most expensive office leasing market, although only by a modest margin. CommercialCafe reported that average asking rents reached $28.39 per square foot during June while vacancy also stood at 17.8%.
Nationally, developers continue to add new office space, although construction remains limited compared to the size of the existing inventory.
CommercialCafe reported that 29.6 million square feet of office space was under construction across the markets it tracks as of June, representing roughly 0.4% of existing office inventory. Developers have also delivered 11.1 million square feet of new office space so far this year.
Three markets each had more than 2 million square feet under construction in June: Manhattan, Boston and Dallas, according to CommercialCafe.
Dallas continues to draw attention because of its employment growth and expanding financial sector. CommercialCafe reported that the metro had approximately 2.9 million square feet of office space under construction in June, equal to about 1% of its inventory, even though its construction pipeline has declined 11% from a year earlier.
The report noted that Dallas recorded 0.6% office employment growth in May, supported by continued expansion in professional and business services as well as financial services. That employment growth, combined with businesses relocating to or expanding in the metro, is expected to support future office development.
CommercialCafe highlighted Goldman Sachs’ planned 800,000-square-foot campus at 2323 N. Field St. as one example. The project has already broken ground and is expected to open in 2028, underscoring that while office conversions are reshaping older buildings, demand for new office development remains alive in select high-growth markets.
