Apartment Conversions from Old Office Buildings, Hotels, Factories: The Numbers

A costly slow process that gives some buildings a second life.

By Wolf Richter for WOLF STREET.

What is going to happen to resolve the office glut, the enormous amount of excess office space? In many of the top markets, available office space for lease now exceeds 20% of the total office space, including 26% in San Francisco and 33% in Houston. With so much office space available, companies upgrade from their old digs to the latest and greatest when their lease expires. But what is going to happen to their old digs?

Commercial buildings – not the land – are depreciated to zero, and for most of them, that’s the ultimate value. But for some, there is a second life with a different purpose: Redevelopment into residential buildings.

For 2021, a total of 20,122 apartments are expected to be completed, in 151 buildings of all types, with a surging share of office buildings, according to Yardi Matrix data cited by sister company RENTCafé. But it’s not huge: By comparison, new construction starts of multi-family buildings with five or more units averaged around 370,000 units per year over the past five years. The number of completed buildings in 2021, at 151, are over double the number in the prior two years.

Redevelopment of commercial buildings into residential buildings is a slow and expensive process, often involving the building defaulting on its debts and ending up with the lenders that sell it, usually at a big loss, to a developer who, now with a much lower cost base, can spend lots of money to redevelop it into apartments.

Office conversions have been the leader since 2013, and they shot higher in 2020 and 2021 and have far outdistanced factory and hotel conversions. Hotel conversions are easier to accomplish because the existing floorplans, utilities, and other aspects are less costly to adapt for residential use. But the real volume going forward is in office buildings, given the vast amount of space available, though they’re more costly to convert than hotels:

Redevelopments could cost about 30% to 40% less than new construction for the same number of units, but only if the cost of the site and the building is not significantly higher than the cost of site acquisition for new construction, according to Emil Malizia, at the Department of City & Regional Planning, at the University of North Carolina at Chapel Hill, cited by RENTCafé.

This is why a landlord that owns the office building at the cost of an office building, and uses it as collateral for loans, cannot redevelop the building. This would be too costly; and the lenders would refuse. So when the office building empties out, the landlord lets it default and go back to lenders which then sell it for cents on the dollar to a developer, who then owns it at a much lower cost base and can then invest large amounts to redevelop the building.

Here is an office redevelopment, in Washington, D.C., The Wray with 150 apartment units, in a building once occupied by the State Department:

The pandemic travel collapse special: In terms of applications for redevelopments filed during the pandemic itself, in 2020 and 2021, when many hotels were closed, hotel buildings jumped to the number 1 building type for conversions, with 86 hotel buildings, or 30% of total projects, initiating an application for redevelopment to residential, according to RENTCafé.

Going forward, for 2022 and beyond, 306 buildings are already in the pipeline for redevelopment, with an expected 52,700 apartment units. This includes projects that are under construction, to be completed in 2022 and after, as well as projects that are in the approval process or in the planning stages, according to Yardi Matrix data. Of them, 23% are office conversions:

Top 10 Residential Conversions 2022 and Beyond
1 Office 23.4%
2 Factory 17.4%
3 Hotel 15.2%
4 Healthcare 9.7%
5 Warehouse 8.3%
6 School 6.4%
7 Retail 4.4%
8 Community center 3.6%
9 Government 2.8%
10 Financial 2.1%

Office conversions take years before construction can even start. First, the remaining tenants – they have long-term leases – have to leave. The building has to go through a default and foreclosure process so that lenders can sell it. Then the lenders have to find a developer willing to take on the project, and a deal has to be made. Then the developer has to start the planning, obtain funding, get the permits, etc. before construction can even start.

If no developer can be found because the building is not worth redeveloping, or is not suitable for redevelopment for other reasons, such as location, or would cost too much to redevelop, given the local housing market, and if it can no longer compete in the local office market, it may have to be torn down after years of sitting there empty and boarded up, to make room for new construction, a small park, or a parking lot.

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  84 comments for “Apartment Conversions from Old Office Buildings, Hotels, Factories: The Numbers

  1. Random guy 62 says:

    Stayed with a friend over the weekend in a newly renovated downtown Chicago building. Most recently a law office, and now an apartment complex. Pretty nice place…definitely on the luxury side of pricing and amenities. It wasn’t my taste because the whole place felt like a hotel, but it was near maximum occupancy already.

    Seems there is some hope for old office buildings.

    • otishertz says:

      Wolf, typo 1st paragraph “hold digs?”

      Feel free to delete this post. Just looking out for ya

      • Joe Saba says:

        I’d love to convert an old KMART into low cost housing
        but BLUECOAT CITY seeking to maximize rewards(fees, etc.) would require us to DEMOLISH perfectly good structure
        also since it’s commercial we’d have to RE-ZONE it at great cost and 23 department sign-offs – cost $100k+
        I’d even allow those terrorists – afghans into it – of course with city paying BIG$$$ for it

        • Delikon Threetree says:

          Starting 3 months ago they have torn down an old Kmart and started building a mixed use development on the site at N.E. 6 St. and Oakland Park Blvd. In Oakland Park, Fl., Commercial shops in the front and condos in the back.

        • Tim Walker says:

          8.4 trillion redcoat deficit increase under Trump. Maybe you should move to Alabama that economic powerhouse of commerce run by redcoats.

    • Michael Gorback says:

      People left Chicago due to high taxes, political corruption (the FBI’s largest anti-corruption unit is in chicago)
      union dominance (Ever seen a Wal-Mart in Chicago? No, they’re just outside the city border), an economy heavily dominated by government jobs, and rampant street violence but then returned to live in repurposed office buildings “definitely on the luxury side of pricing and amenities”?

      I can’t wait to see the refurbished Fukushima reactor.

      • taxpayer says:

        There are 8 Walmarts within Chicago City Limits.

        • Joe Saba says:

          and zero on south side

          elliot ness would be proud

        • Kielbasa says:

          Joe Saba, read the link: Wal-mart stores at 7535 S. (as in South) Ashland; 4720 S. Cottage Grove; 8331 S. Stewart; 10900 S. Derby. Sheesh. I suppose this list leaves out the Wal-mart they burned down in honor of St. George, or whatever the excuse was.

          Thanks, taxpayer!

        • VintageVNvet says:

          OK, old guy here who after boot camp in late ’64
          went to “A” School at Great Lakes Naval Training Center across the street but also across a HUGE divide for many reasons including understanding how to do one’s duty…
          Classmate had a relative down in CHI town and invited some of us to share it, along with all the beer we wanted…
          Woke up early Sunday morning and walked about 20 miles west from ”The LOOP”,,, nobody,,, repeat, nobody ”messed” with me (in ‘civies’ ,,, and most of the folks seen on that walk smiled and or waved,,, Cicero especially…
          Chicago WILL come back IMHO,,, sooner AND later,,, and the CPD will absolutely be a BIG part of that come back,,,
          Many places, perhaps led by Morgan Freeman, already ”refunding” their PDs, and likely to continue until at least the vast majority of bad folks do what was done back in the 1930-50s, and ”got out of Dodge.” OK much much farther back in USA and many other countries facing similar challenges these days and those days….
          Thanks again Wolf for your very excellent reporting!!!

        • Michael Gorback says:

          My apologies. I inadvertently used data from an outdated source.

      • Shiloh1 says:

        Go to news blog CWBCHICAGO dot com and see the latest in Chicago’s best areas, including a short video on uber-hipster Wicker Park the past weekend.

        • Phil says:

          Wicker Park, isn’t that where the huge shoot-out was last week, right near the Uber Hipster, Piece Pizza? Chicago’s finest has now discovered how much fun can be had shooting up Wicker Park. Uber Chumps!

    • historicus says:

      The car jackings…
      and the shootings where they just pull up to you and shoot you..
      gang initiation things

      The city of “big shoulders” now “big shootings”

      • Xavier Caveat says:

        Chicago used to be called ‘the second city’ but now it’s more like ‘the second amendment city’?

        • Nacho Bigly Libre says:

          It’s in fact anti-second-amendment city. Anti self defense. One of the strictest gun control cities.

    • RH says:

      After his initial articles, I am surprised that Wolf is not covering the unraveling of the Chinese real estate market as to its developers more. The CCP crooks will have to either decrease the amounts of stolen funds that they have been shipping out of China to buy expensive real estate throughout the world or develop condo conversions or other real estate developments or even bring back some of it back to China to cover their debts.

      I predict that there will be definite contagion effects all over the world’s economies, since they are really all one, linked economic web. The crash is building slowly in China. I suspect that Chinese people, who will realize how they have been getting defrauded for years, will be too smart to allow the CCP developers to continue defrauding them. That will be the doom of those developers, if not of the CCP.

      • Ron says:

        And what,s the difference in America it’s a global scheme

        • RH says:

          We have the banksters and Wall Streeters defrauding us through their privately owned, “Federal” Reserve’s creation of inflation. They have Ponzi schemers selling bare real estate that they might build and finish into tofu-dreg construction if gullible purchasers keep buying from them.

          The cons are different. LOL

      • The Real Tony says:

        The Chinese race of people ALL do the exact same thing and at the exact same time. When the housing ponzi implodes it will affect Canada, New Zealand and Australia.

        • VintageVNvet says:

          BS, but suppose you only left off the various and sundry ”sarc” notices RT.
          Have known many folks born and raised in China and many more of totally ”pure” heritage born in USA, and will be happy to testify, under oath, that what you say about their behaviours is total BS…
          Similar to SO many folks, especially here in USA who ”learn” and become wonderfull, wonderfull, wonderfull part(s) of WE the PEOPLE of USA…
          Stop already with the irrational and totally uninformed ”dumping” of any ”ethnic” group on this wonderful site of THE WOLF.

      • Lynn says:

        Yeah, been reading about it and am hopeful RE prices crash. “B” reported on the recent IMF report and they (IMF) are cautioning this might happen because of all of the above, leverage etc. but I think it ties into Chinese RE.

        Evidently Evergrande wasn’t the first, just the massive straw that broke the camel’s back. Many other firms defaulting. Looks like the business culture with RE firms based in China is one massive Ponzi scheme. Maybe anything else could not compete? China is guaranteeing small investors and the firms are paying back some of the interest on Chinese loans, but it seems the offshore bonds in USD and USDT are not getting paid.

        Add coal scarcity and power rationing and it looks like maybe a perfect storm brewing.

  2. qt says:

    Speaking of conversion and redevelopment cost, the price of lumber is going up again. Yes, still much lower than the $1,600 during the bubble but double the prices from previous years.

    But we all know that inflation is transitory and lumber prices will go down soon. /S

    • IanCad says:

      Even with lumber prices hovering around $700.00 MBF the material to frame and sheath a 1500 sq ft. three bedroom house plus a two-car garage is still only about $5,000.00.
      A crawl space would add almost another 3k.
      Lumber prices are not that significant in the overall price of a house.

      • Old School says:

        Is that correct? A builder building a 1950 sq ft home told me the framing package had increased by $20,000 at close to the peak. He was thankful he was past that stage in construction when the spike hit. He did have trouble finishing the house due to getting certain items.

        • VintageVNvet says:

          YES,,, as an old and retired ”framer” and then GC (as opposed to ”specialty” contractor for those not clear about it.)
          Builders like to add as much as possible from their original ”estimate” ,,, but if you crank the numbers as I have done for the last 60-70 years, the price of lumber is just a small bit of the overall cost of any stick framed house, and even smaller if the house has a bunch of ”pre-framed” components, formerly only roof trusses, but now can contain wall framing components, etc.
          Fairly easy to compute lumber components of every construction, IF SFR or MFR, etc.,,,, NOT always so easy to compute with re the ”conversions” about which this article is focused…
          EXACTLY why the cost challenges, as MOST ”estimators” these days have no experience in the field doing this work, so throw money at it.

        • IanCad says:

          Many; probably most, contractors, get their lumber supplier to take off and bid for the complete lumber package. That alone will add 30% to the price. Far wiser for the builder to sharpen his pencil and do his own lumber list.

  3. Kaleberg says:

    What’s interesting is that office to residential conversions have been going on for a while. I know that in DC, a lot of suburban office buildings found themselves in the wrong location and out of fashion. There was talk of conversion five or ten years ago. As usual, COVID hasn’t been changing trends, it has been accelerating them.

    • Michael Broderick says:

      As an architect in the DC area I can confirm that office conversions are an extremely hot business segment right now. Wolf was completely correct about the financial side of it. Most typically the building has to default back to the lenders before it becomes attractive to the developers but in some cases the building are old enough to be owned outright or just don’t have a lot of leverage on them in which case the re development is pretty straightforward (assuming of course that the building is no longer profitably leasable as office space)

      Drilling down into the practical elements; the site utilities and sub grade parking / foundation work is already there and sized almost exactly to what you would need for a residential use.

      Likewise the building core services and elevators are already in place.

      The biggest challenge is the building footprint / floor area itself. A residential design (clean sheet of paper) would try to maximize daylight as one of the primary priorities. Unlike an office design which is trying to maximize rentable square footage.

      Depending on the lot size, this generally leads to a ‘long / thin’ approach with ‘U’ ‘L’ or ‘Z’ shaped floor plates. Offices on the other hand are just big rectangles

      For older, conventionally reinforced concrete (NOT post tensioned) the usual and obvious approach is to just ‘carve out’ portions of building along the column lines, eliminating entire column bays to bring more light into the interior of the building. It mostly just comes down to the structural system, the size of the lot and the shape of the original building. Some just work better than others and ironically, the older the building the better.

      Office buildings within the past 25 years however are much more of a challenge because post tensioned concrete became much more widely used and that type of structure is nearly impossible to significantly modify.

  4. Swamp Creature says:

    In the Swamp I noticed a lot of churches along with their rectories being converted into residential housing condominiums. This is occurring right on Capitol Hill in the high rent area.

  5. historicus says:

    Defunct brick and mortar shopping malls being converted to apartments by me…
    then a collection of restaurants right out the door…

  6. 2banana says:

    Those old office buildings, built like tanks, are already fairly compartmentalized.

    Newer office buildings would seem much harder to convert.

    • Apple says:

      New offices are easier to convert. They are basically concrete slabs stacked on top of each other with support beams.

    • Michael Gorback says:

      And the old ones are already pre-filled with asbestos. I had a friend who bought an old building and renovated it. It was full of asbestos. He hired a bunch of homeless people to tear out the asbestos. They put it in a dumpster near a school.

      Someone got curious about these homeless people covered in dust and looked into it. The guy got ONE YEAR in federal prison. One effing year, and got his medical license reinstated. Where’s a good guillotine when you need one?

      • robert says:

        The asbestos doesn’t matter … until you tear it out.

      • Michael Broderick says:

        Asbestos was phased out starting in the mid 60’s and completely banned by 1972. Fortunately, it’s mostly been eliminated in most buildings at this point because it was primarily used as duct and plumbing insulation and those systems have a maximum lifespan of 25 to maybe 40 years before they need to be replaced so most large buildings have already been forced to deal with it (or they were just demolished outright)

    • Michael Broderick says:

      Exactly. Newer construction (within the past 25 years) is more likely to incorporate post tensioned concrete and that is practically impossible to modify in any significant way. See my comment above for more detail on that.

  7. Seneca’s Cliff says:

    In the PDX there are a couple of churches that have been converted in to brewpubs. My son used to live in a converted ice cream factory in Brooklyn. The key here is that these were all cool old buildings in interesting parts of town. Converting an old big box store in a strip mall in suburban Phoenix lacks the same sparkle.

    • anon says:

      Same in New Buffalo Michigan. Beer Church Brewing. Their patio is 21+ only. The tables inside are nicely spaced for families with young (grand)children. The food and beer is a little better than average. But it was a fun place to take the kids.

  8. Brady Boyd says:

    Turn the empty office buildings into homeless luxury apartments. When Amazon moves out of Seattle to Bellevue and other eastside cities look for Seattle City Council to do this with the vacant Amazon bldgs for the homeless.

  9. Anthony A. says:

    There are 2.883 apartment complexes in Houston with about 690,000 residents. More and more are built every year. Then you have the surrounding communities with their large amount of apartment complexes. Someday we will all be living in an apartment (except for the 1% I would guess).

  10. cas127 says:

    “Redevelopments could cost about 30% to 40% less than new construction for the same number of units, but only if the cost of the site and the building is not significantly higher than the cost of site acquisition for new construction”

    This was the most valuable info in the post since it seems to be saying that the shell and rough (very rough) internal plumbing, electrical, and HVAC account for 30% to 40% of new builds (thus saved in conversions…land being a wash per stated condition).

    That seems like a lot of savings to me (slow or fast, foreclosures being inevitable…that is the predicate assumption of the whole exercise).

    Imagine knocking 30% to 40% off new build apt rents…the medians won’t fall as much…but they will fall a lot.

    Of course, conversions are a small percentage of new builds…but as least in theory they could be faster to mkt (shell/rough internals already built…do lenders *really* want to drag heels on hopeless cases? Maybe…there are plenty of foolish lenders…

    • Lisa_Hooker says:

      Cas – or imagine getting 30-40% more rent income without raising rent. More likely.

  11. Michael says:

    Sounds like a short term solution that will work just until the next recession

    • Thomas Roberts says:

      It’s worth noting that a lack of zoning laws and planning (in relation to commercial vs residential areas) were a substantial reason for the decline of Detroit. There were of course bigger reasons as well, but the poor zoning planning was a major factor. If you had a factory surrounded by apartments, good luck trying to expand that factory. There was also quality of life issues such as various forms of pollution (air, noise, light) and much more.

      In the present, imagine if you (a business owner) have a very expensive, very highly taxed office building in a downtown area and the building next to you, gets converted into apartments. The question is how long until some of these new neighbors start to complain about the traffic coming from your building, the lights on your building being on at night, and much more? Imagine if city hall starts to demand changes to the way your business operates in order to appease the new neighbors.

      Many problems unforeseen and ignored, can result from doing things like converting office buildings into residential property. If we were to assume that the need for office space was going to decline substantially, you would be better off shrinking the office/commercial zone and expanding in from the edges. Only some buildings make sense to convert and the rest would have to be demolished and built from scratch. Anything borderline should be rebuilt.

      • Petunia says:


        You are obviously not a city dweller. City dwellers know about maintaining personal space, it is how they can tolerate the city. Most don’t know their next door neighbor’s name. The building next to theirs or across the street, might as well be on an adjoining galaxy.

        • Michael Gorback says:

          I had culture shock moving from Boston to Durham, NC in the 80s.

          People would make direct eye contact on the street and I’d wait for the “spare change?” or “gimme yer dough”. But instead they’d just say hi and keep walking. The first time I literally stopped and turned around to see if he was sneaking up on me.

        • Thomas Roberts says:


          People in all types of American cities (tiny to very large) often complain and may try to get city hall to stop developments around them or even interfere with developments much farther away. I hear about this quite alot happening in California and NYC. If the new developments are very similar to their current ones, there is the smallest chance of opposition.

          The fact is if a building in the middle of a large commercial zone gets converted into residential housing; the residents there may start complaining about trying to stop new buildings around them, particularly if the new building will be bigger than the last one.

          If you a business owner and you buy up a building that you plan to demolish and replace with something bigger, nearby residents, might protest that it will block their views or in some other way diminish their housing and try to stop it.

          It’s also possible that residents of a converted into apartment building will try to block nearby apartments conversions.

          This can and will, if allowed to happen, drive away businesses.

        • Thomas Roberts says:

          Here is one of countless, and I mean countless, examples of people in a large American city trying to block new developments for whatever reason.

        • Petunia says:


          I rarely saw opposition to new construction in NYC. The only thing nobody wanted was a drug addiction center/dispensary on their block. Other than that, everything was considered an improvement.

          Florida was a different story, the central planning was out of control.

  12. Craig says:

    It seems like an endeavor that would greatly benefit the nation were it incentivized in an infrastructure package perhaps? Help get existing leases off the hook, help the landlords to be able to release the property, get new real estate available in productive areas? Although I am sure the actual logistics would be much more complicated than they seem superficially.

    But who am I kidding? If it helps the plebs, it can’t happen. And god forbid if it slowed down real estate appreciation by increasing supply relative to demand!

  13. Rcohn says:

    If working from home becomes permanent, then businesses which are supported by office workers will not survive . Between workers having no incentives to live near their former offices and businesses closing down, there will no need for residential conversions . Vast swatches of our cities will become ghost towns. Combine this with the trend toward defunding the police, crime will rise to previously unthinkable heights

    • RedRaider says:

      … then businesses which are supported by office workers will not survive .

      Neither will residential properties close to those businesses which one can infer exist only because of the businesses (at least to some extent).

      I think things are in great flux right now. Much too complicated to make a prediction on the outcome. Some things will die, others will be born. The best thing we can do is preserve our capital until we see what’s being born and then pounce.

      And it’s painful waiting as our capital slowly depreciates away.

      • RightNYer says:

        Not entirely. He’s referring to businesses like sandwich shops, takeout pizza places, dry cleaning shops, and fancy steakhouses will largely cater to a corporate in-office crowd. People who like cities (I am not one of them) like living near things like restaurants, bars, theaters, and so forth. Those aren’t the businesses that are negatively affected by people working from home.

        • Rcohn says:

          My daughter lived in Berkeley and commuted to SF. Then Covid came and her company allowed workers to work from home. They then went through the numbers and decided to make working from home permanent , since they reduced their lease costs significantly
          My daughter misses the night life of SF, but would rather be closer to the mountains, so she moved to Colorado.She still works from home.
          I doubt whether she is an isolated example.
          Seattle has cutback its police in wake of riots last year and the “defund the police” movement. Crime has soared. Add to this is the possibility of 1,000 police resigning due to vaccination mandates and it does not take a rocket scientist to see the consequences.
          Elon Musk is moving his headquarters from PalO Alto to Austin Tx. State income taxes are much higher in CA than Tx .
          Betweentaxes and soaring crime , the large high tax cities are doomed. Their only defense will be to cut expenses, cut taxes and reduce crime

        • Wolf Richter says:


          “Add to this is the possibility of 1,000 police resigning due to…”


          “SPD set an earlier deadline of Oct. 5 for vaccine verification, at which point 354 sworn officers still had not submitted proof of vaccination. By the next day, that number dropped to 292. “Overnight we had 64 officers turn in their vaccine verification forms. Obviously, our hope is to get that number as low to zero as we can between now and October 18,” said Sgt. Randy Huserik, with Seattle Police.”

          And that number of 292 has kept shrinking and might be very small by Oct 18.

          BTW, 92% of the employees of the state of Washington were fully vaccinated as of a few days ago, and the number keeps growing.

          People need to quit making up stuff about this.

    • robert says:

      In Toronto a huge number of heavy, medium, and multi-storey light manufacturing buildings have been turned into condos, also the acres of manufacturer’s sites (when old obsolete buildings have been torn down) have been used for new condo builds. Hotels and office buildings are candidates too.
      All the jobs have been shipped out over the last generation; virtually no significant manufacturing remains.
      What are all the people working at who are buying all the 10s of thousands of condos, with thousands more added each year?
      Even allowing for specs and overseas money it doesn’t add up.

    • Michael Broderick says:

      I tend to disagree. Working from home has certainly changed the dynamic but living IN a city still has a lot of appeal and advantages for a lot of people. What’s changing are the traditional commuter patterns (suburbs to cities) but the work from home thing could actually be a godsend for the traditional ‘urban cores’ if it leads to more people actually LIVING there 24/7.

      This isn’t true for all cities of course but I see it happening in DC, Philly, Richmond and to a lesser extent, Baltimore (though Baltimore is still a real $hithole in a lot of ways)

  14. Roger D Barris says:

    You need to look at the UK market.

    A number of years ago the UK government adopted a regime of “Permitted Development Rights” which give, among other things, the automatic right to convert offices to residential so long as the existing envelope of the building is unchanged and so long as the building is outside limited designated areas of high demand for office buildings. In certain cities, particularly secondary cities, this has led to about 20% of the office stock (typically 60s and 70s constructions in downtown locations which no longer meet modern office requirements but which have excellent locations) to be converted to residential. This has greatly contributing to maintaining reasonable occupancy of office buildings in these cities.

    US cities should adopt similar rules. But most of them are surely too stupid to do this.

  15. BuySome says:

    It’s kind of odd that people are trying to measure change through observation in such a small window. We usually see things as set decades, but which are in reality out of sync with calendars (eg.the ’20’s begins in 1919, the ’30’s in 1929). Only when we get to the ’60’s does every 365 days act like a decade unto itself, such that trying to bridge the gap from 1960 to 1970 is like a century of difference. We resumed the old count right up until Covid made this seem like we were in a freeze frame with a film caught in sprocket jam. All keep staring at the color image that was, but the projector bulb is melting away the stock and we’re being blinded by the glaring light in disbelief. There is no possible way to predict what we will be seeing in the next frame assuming the jam is cleared. There is just no way to declare anything to be a concrete trend in such a peep hole glimpse. The rest of the film might be “Everclear” or a double exposure where we can’t recognize that world.

    • p coyle says:

      “All keep staring at the color image that was, but the projector bulb is melting away the stock and we’re being blinded by the glaring light in disbelief.”

      this is the best way i’ve seen anyone describe the current situation. thank you for that.

      add to this, the majority of the moviegoers will either not notice because they are looking at their phones, or will be using their phones to make a video of it to post to the internet.

      who knows what those that aren’t distracted by phones will be able to accomplish, for both good and ill.

      my prediction is little good will come of it, but as you point out, it is nothing but a guess. nobody can see the other side yet, as we’ve barely gotten started.

  16. Felix_47 says:

    I wonder how one could convert old shopping malls in a cost effective way. It seems hard to do. LA with its burgeoning migrant population has plenty of underused big box stores and malls. And a major factor driving prices is the fact that middle class neighborhoods are filling up with four and five families living in one house and garage and there is no enforcement. So there is demand and vacant office space. So far I have seen no evidence of an effort to house this population other than ignoring safety and housing laws by the government. Maybe with the child care and tax refunds for children they will be able to pay rent for more than a bedroom or garage.

    • Wolf Richter says:


      A regular suburban-type shopping mall with tilt-up concrete walls is worthless for conversions. The building itself is worthless now and was cheap to begin with. These types of shopping malls are redeveloped by tearing down the buildings. But if they’re in the right location, they’re great for conversion to housing because they have huge amounts of land due to all the parking space. This is being done in San Francisco. They’re going to build 3,000+ housing units plus shops etc., on one shopping mall, and retain some portions of the old buildings (cinema, big grocery store, etc.)

      • Lynn says:

        “They’re going to build 3,000+ housing units plus shops etc., on one shopping mall, and retain some portions of the old buildings”

        That’s awesome! & you said Stonestown, even more awesome. That’s a huge property.

    • Lynn says:

      “I wonder how one could convert old shopping malls in a cost effective way.”

      Leave bolt cutters laying about the neighborhood maybe?

  17. steve says:

    I don’t know about over there but office conversions in the UK have been truly horrible.

    Most are 1960’s small office blacks that nobody wanted, they have very few parking spaces and are in odd locations, often nearby industrial areas with constant noise. To cap it off the conmen converting them are allowed to make shoebox size “apartments”.

    I suspect they will be banned eventually, it just generates future problems.

  18. phleep says:

    It seems positive to me, repurposing construction already done, in existing footprints, especially versus intensifying the new in-filling development or sprawl (I see as degrading the city where I live).

    My compliments to Wolf for constantly digging up original and interesting angles and facts. I don’t see this quality anywhere else.

  19. Frank says:

    Wolf, how is this trend effecting REIT’s? Would appear that many would be taking a sever haircut.

    • Wolf Richter says:

      I don’t see conversions as negative for REITs — I assume you’re talking about office REITs. The negatives for office REITs are the high vacancy rates, and the possibility that the REIT will give up an old building and let it default and go back to lenders. What happens afterwards no longer impacts the REIT. That would now be the lender’s problem.

  20. elissa3 says:

    Any data on the recycling of defunct shopping malls? I’d think that by now there would be a few regional or national players with cost-effective plans/ideas, but all I’ve read so far are one off conversions.

    • Wolf Richter says:

      I’ll just repost what I posted elsewhere here:

      A regular suburban-type shopping mall with tilt-up concrete walls is worthless for conversions. The building itself is worthless now and was cheap to begin with. These types of shopping malls are redeveloped by tearing down the buildings.

      But if they’re in the right location, they’re great for conversion to housing because they have huge amounts of land due to all the parking space. This is being done in San Francisco. They’re going to build 3,000+ housing units plus shops etc., on one shopping mall (Stonestown Galleria), and retain some portions of the old buildings (cinema, big grocery store, etc.)

    • Michael Gorback says:

      Only the class A malls are viable conversions. The rest are teardowns.

      • Michael Broderick says:

        Anything that was designed for a retail use would need significant upgrades to the water and sewerage utilities to be converted to residential multi family.

        Given the expense of that, it’s easier to just demolish it entirely and start over.

        Wolf pretty much nailed it with his previous comments.

  21. Petunia says:

    Most of downtown Manhattan consists of old factories and offices converted into lofts and apts, street level retail as well. Started in the recession of the 1970’s when businesses occupying those spaces could no longer hold on. Landlords started to look the other way and rented to anybody who could pay, mostly artsy types back then. By repurposing those spaces the landlords were able to retain some of the value of the properties.

    Nobody was lending on these buildings back then. It was decades before the lenders would even consider refinancing a coop or condo conversion.

  22. Seneca’s Cliff says:

    The shopping malls could be converted in to small industrial and commercial space. Where I am we have a shortage of such space. While retail is shrinking there is a growing need for spots where people can base their delivery, window blind, plant watering and tub resurfacing type companies. The shared bathrooms and lack of plumbing is fine. I think we will find there are limits to the model where everyone works from home tapping keyboards and ordering food online.

  23. Rosebud says:

    My Reid (RE investment dis-trust), Wolf, is to remind myself to pick up that space heater for the van, now that the parking spot is tenured.

  24. Michael Gorback says:

    Buy REITs that are unrelated to residential property (although I do own some Avalon Bay).

    There are REITs for cloud server location (the could servers are not in the clouds), distribution centers, cell towers, etc.

    The cell tower REITs are a particular interest of mine. If you look for 5G investments they don’t show up because they’re categorized as real estate. However, they own thousands of cell towers and a zillion miles of fiberoptic.

  25. marquis says:

    And none of it ever for low income.
    Or I should say for regular low income people.
    In NY all these places have a contingent of “low” rent attributed “randomly” to the friends and dependants of Democrat politicians.
    That’s the nature of the beast.

  26. Rosebud says:

    Yeah I overpay for cellphone service by half yards and cubits.

  27. Lynn says:

    On hotels… I assume motels enter into that equation as well? The motels around here and the hotels in city areas that I’ve seen transforming into housing had already actually done that prior to applying for that category.

    The ones here are rooms for monthly rent with a small fridge and some sort of cooking thing- sometimes a hot plate. Not sure what percentage of the whole that would be. It is definitely more housing, which is definitely a good thing, but it’s not a very good quality of life. The more ruinous the building the more likely the conversion is to happen with minimal if any repair.

  28. Mira says:

    Not 10 minutes ago, on channel 10 TV, Victoria,
    A Victoria Federal Police Officer told ..
    The interview was introduced as, “Look what Facebook is doing”
    Implying that Facebook was facilitation a child pornography & prostitution racket.
    Tell me that someone is not after Facebook.
    Mark Zuckerberg who wants what you have 😁??
    What him fall from riches to rags in no uncertain terms.

  29. Mira says:

    Apartment rental cheapest in Victoria’s CBD ..
    There is a glut of empty apartments [greed is good] the inner city of Melbourne Victoria will become housing for the poorer citizens in the state .. drug abuse will became the norm .. crime rates will go up .. the legitimate & classy brothels will go out of business as the street working girls set up shop & just U watch the CBD property down value.

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