The Inside Look with Xander Snyder - Episode 7

On the seventh episode of ‘The Inside Look,’ Senior Commercial Real Estate Economist Xander Snyder discusses the impact of office-to-apartment conversions on apartment supply.

Hi, I'm Xander Snyder, and this is First American's Inside Look. A recent report from Rent Cafe gave us an updated estimate on the number of apartment units that will be converted from office buildings this year. And at first glance, it looks like a lot. Here, take a look. From 2021 to 2024, the number of apartments scheduled to be converted from office space more than quadrupled from 12,000 units to 55,000 units.

Now, that's rapid growth, but what does growth tell us about the impact of office conversions on apartment supply more generally? Not a whole lot. For that, we need to know what portion of new supply these 55,000 conversions represents. According to the Census Bureau's new residential construction report, there were nearly a million apartment units under construction as of December 2023, a near-record high.

So relative to this new supply of ground-up development, the 55,000 units of office-to-apartment conversions only represents about 5% of total new supply. Now, if we're talking about the total size of the pie – so the existing stock of apartments that are already out there – this million new units of ground-up development will add to the inventory of apartments by about 4%.

Now, by contrast, the 55,000 units of office-to-apartment conversions will only increase apartment stock by about 0.2%. Not a whole lot, and certainly not enough to fundamentally shift the national supply-and-demand dynamic for multifamily housing.

I'll be giving a talk about the state of the commercial real estate economy at ALTA’s Commercial Network Conference in New Orleans at the end of February, so hope to see you there.

Thanks for joining us, and we'll see you next time on The Inside Look.