- Houston has the third-highest volume of office-to-other-use conversions in the US, with 6.7M SF planned or underway.
- These conversions now outpace new office construction locally, as the city grapples with a 25.9% office availability rate.
- Nationwide, 2025 will mark the first time in decades that more office space is being demolished or converted than built.
Houston Leans Into Conversions
With office availability nearing 26%, Houston’s CRE sector is turning to adaptive reuse to tackle a longstanding oversupply, reports Bisnow. According to CBRE, 6.7M SF of office space—equal to 3.2% of the market—is in line for conversion, with just 630K SF of new office product under construction.
What’s Driving The Shift
Office demand remains weak across the US, while multifamily demand continues to thrive. “You look at the opportunity on the other side,” said CBRE’s Jessica Morin, pointing to multifamily’s lower vacancy and sustained rent growth since the pandemic. Those dynamics are pushing both developers and cities toward conversion projects as a solution.
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On The Ground In Houston
Of the 10 Houston office buildings either converting or announced for conversion, six are being redeveloped as multifamily. The largest such project is the former 1.1M SF Fluor Corp. campus in Sugar Land. Local developer Lovett Group plans to build Lake Pointe Green, a mixed-use redevelopment with around 720 residential units, supported by $24.3M in city-backed incentives.
Policy Support And Barriers
Cities like Houston are offering incentives and easing regulations to accelerate these transformations. The projects promise to revitalize neighborhoods and boost property tax revenues.. However, CBRE cautions that high construction costs, labor shortages, and zoning challenges still pose obstacles. These issues are especially problematic for older or poorly designed office buildings.
Demolition Becomes A Tool
In some cases, office buildings aren’t suitable for conversion at all. Nationwide, 10.5M SF of office space is set for demolition this year—the first time that figure has exceeded 10M SF, according to CBRE.
The National Picture
Across the US, 23.3M SF of office space is slated for demolition or conversion by year-end. While office construction has nosedived—from an average of 44M SF annually over the past decade to just 13M SF this year—the conversion pipeline continues to grow. In 2024, 94 office conversions were completed, and another 68 are expected in 2025.
Outlook
The US office market may be slowly stabilizing, as seen in four straight quarters of positive net absorption. Still, with cities invested in reducing vacancy and boosting housing stock, office conversions are likely to remain a significant trend for the foreseeable future.
