Goldman Sachs Says Conversions Are Too Expensive

Since the depths of the pandemic, two things have been clear. One, there isn’t enough housing available for people. Two, given hybrid work and companies exercising a so-called move to quality, a lot of office properties are obsolete and facing still-growing vacancy rates that make them financially unviable.

Many people thought conversions would make sense. Turn the obsolete office buildings into multifamily dwellings. Help the housing crisis and improve the financial position of the property owners. This year, Yardi expects 55,000 apartment units to be converted from office buildings. That has quadrupled in four years. But that’s less than it sounds. Assume an average 75 units per building. That’s 733 buildings in an unusually active year of conversion — a rate at which it would take many years to do all the conversions.