For the first time ever, hotel to apartment conversion projects have overtaken office-to-residential conversions. In 2023, hotels accounted for over one-third of all adaptive reuse projects in the U.S. with over 4,500 units delivered.
In its analysis of Yardi Matrix data, RentCafe finds that of the buildings converted in 2023, hotels comprised 36% of the total—the largest share among the group. Office buildings made up 28% of adaptive reuse projects, followed by factories (15%), warehouses (9%), and others (12%).
The adaptive reuse scene is poised for even further growth as 151,000 apartments are currently in various stages of conversion, according to the RentCafe analysis.
"The adaptive reuse market does show a bifurcation between high-end and low-end markets,” says Doug Ressler, Senior Analyst & Manager of Business Intelligence, Yardi Matrix. “This is particularly evident in the commercial real estate sector, where a sizable portion of office vacancies are found in older buildings with reduced functionality and lack of modern amenities.”
Overall, over 12,700 new apartments were converted in 2023—a substantial 17.6% increase from the previous year. Hotels made up 4,556 of those units.
Are Hotels More Equipped for Residential Adaptive Reuse Conversion?
Most of the hotel to apartment conversions come from Class B hotels. Though not without its challenges, hotel-to-residential projects can be completed faster and at a lower cost than office building conversions. This is due in part to already existing floor plans, water systems, and waste lines that are relatively easier to modify.
Thought while some underutilized hotels are located in city centers, other potential conversion candidates are in “less desirable locations next to airports or off major highways far from residential communities—factors that can suppress the value and appeal of residential conversions,” said Chris Walker, Planning and Community Development Project Manager, Aufgang Architects.
These issues can be of less concern in converting hotels to affordable or supportive housing rather than market rate, according to Aufgang.
RELATED: Hotel vs. office: Different challenges in commercial to residential conversions
Top Metros for Hotel To Apartment Conversion
Manhattan, N.Y., has become a hotspot for hotel conversion projects. All of its 733 converted units in 2023 came from repurposing hotels. Manhattan now holds nearly 6% of all converted apartments in the U.S., according to RentCafe.
Top 10 Metros with Most Converted Apartments from Hotels in 2023
- Manhattan, N.Y., converted 733 apartments in 2023.
- Albuquerque, N.M., converted 300 apartments.
- Richmond Va., converted 291 apartments.
- Hialeah, Fla., converted 251 apartments.
- Overland Park, Kan., converted 220 apartments.
- Sterling Heights, Mich., converted 213 apartments.
- Richland, Wash., converted 207 apartments.
- Las Vegas, Nev., converted 199 apartments.
- Salt Lake City, Utah, converted 184 apartments.
- Ruskin, Fla., converted 158 apartments.
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