A new trend is emerging in downtowns: Once empty, obsolete office buildings are increasingly being converted into apartments, the CoStar Group reports. Office-to-residential conversions have been popular in revitalizing some downtowns, particularly along the East Coast, but the trend is now rapidly expanding to Midwest markets.

A survey by CoStar Portfolio Strategy market analysts shows that office-to-residential conversions in some of the nation's top office markets are adding about 11,500 multifamily units to downtown inventories.

"Office conversions are a huge trend we're seeing in a lot of places you wouldn't think about, including Kansas City, St. Louis, Milwaukee, and Cleveland," says Aaron Jodka senior manager, market analytics with CoStar Portfolio Strategy.

In Kansas City, Mo., for example, recent conversions slated are to remove 158,000 square feet of office inventory from the Plaza/Midtown, an area that's become a popular urban address for younger people who are looking for apartments, says Dennis Bradley, principal at B&A Architecture in Kansas City, Mo.

The conversion to apartments is occurring after the owner tried for two years to find a single-use office tenant to occupy a 60-year-old office building that is now being converted into 101 apartment units, including eight two-story penthouses.

Meanwhile, the losses of office inventory are expected to stir more ground-up office construction and leasing activity in other office buildings, the CoStar Group reports.

Source: "Office Today, Apts. Tomorrow: Office-to-Residential Conversions Expanding Access More U.S. CBDs," CoStar Group (Aug. 19, 2015)

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