Of all the property types being repurposed through adaptive reuse, hotel-to-apartment conversions have surged ahead, making up over one-third of all new converted multifamily units delivered in 2023, according to a report by RentCafe. These conversions have been instrumental in the broader trend of adaptive reuse, with hotel conversions such as ArtHaus Jack London in Oakland, California, comprising a significant portion of the new units delivered.
Adaptive reuse deliveries are on the rise, increasing by 17.6% year-over-year to 12,713 units in 2023. Hotel conversions, with 4,556 units, have led the pack, showing a notable increase of over 1,000 units from the previous year. This is the first time in 11 years that more apartments have been converted from hotels than from offices, reports Mary Salmonsen of Multifamily Dive. Office conversions followed, contributing 3,587 units, marking a shift in the conversion landscape.
Currently, over 151,000 adaptive reuse units are in various stages of development, up 24% from the 122,000 projected units in 2022. Offices remain the largest segment of the conversion pipeline, making up 38.5% or 58,000 units, while hospitality conversions account for 34,000 units, positioning them as the second-largest category.
New York City’s Manhattan led the country in adaptive reuse deliveries in 2023, with 733 new units, all converted from former hotels. A significant portion of these units came from 525 Lexington Ave, now a 655-unit student housing property. Manhattan holds 5.8% of all conversions in the country, with 4,363 more units in development, the second-highest pipeline in the nation after Los Angeles, which has 5,881 units in progress.
The trend in hotel-to-multifamily conversions is closely tied to the evolving challenges in the hospitality sector. The pandemic drastically reduced travel, leading to a “flight to quality” that left many older or outdated hotel properties struggling. In 2023, 60% of hotel-to-multifamily conversions were from Class B hotels, with Class A and Class C hotels making up 21% and 18% of the projects, respectively.
Hotel properties are particularly attractive for conversion due to their existing plumbing and electrical infrastructure, making them quicker and more cost-effective to redevelop into housing compared to other methods. This advantage has spurred a significant number of projects, enhancing the appeal of adaptive reuse as a viable housing solution.
As sustainability gains importance in the apartment sector, adaptive reuse stands out as an eco-friendly approach. Doug Ressler, manager of business intelligence at Yardi Matrix, which owns RentCafe, highlighted that this process reduces the environmental impact associated with demolition and the production of new materials. “It’s a sustainable means to create new housing, minimizing waste and preserving the existing building stock,” Ressler said.
The shift towards hotel-to-apartment conversions is reshaping urban landscapes and addressing housing shortages, particularly in high-demand areas. This trend not only supports sustainability but also offers a practical solution to the challenges faced by the hospitality sector, making adaptive reuse a cornerstone of future development strategies.
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