Sometimes our largest obstacles lead to the greatest opportunities. Today’s office market faces its own obstacles: stubborn vacancies, distressed valuations, and a shifting post-pandemic reality. To the trained eye, this isn’t a crisis, it’s a rare window for value creation. We are sitting on one of the most overlooked real estate opportunities in America: repositioning underutilized office assets into higher-performing uses like data centers, small bay industrial, and housing.
Across the country, billions in office equity are quietly eroding. The national office availability rate remains above 20.0%, with cities like Houston (28.3%), San Francisco (28.8%), Chicago (28.0%), and Atlanta (30.3%) facing even steeper surpluses. Yet many of these markets have little to no conversion pipeline beyond office to residential apartments. That’s not just an oversight, it’s one of the few remaining scalable strategies to create value in today’s real estate landscape.
Ask most people about office conversions, and they’ll give you a one-word answer: residential. And that’s a mistake. The old playbook and framing are too narrow and increasingly outdated. The real opportunity is broader, more dynamic, and often more profitable.
We call it ‘office to anything’. It’s a strategy rooted in zoning feasibility, real-time demand trends, and data-driven storytelling. With the right approach, office buildings can be redeveloped into thriving data centers, small-bay industrial, or infill for-sale housing, and in many cases, these repositioning efforts don’t just work, they outperform.
What does it cost?
What can we learn from DC?
But the momentum doesn’t stop there. Nationwide, the number of apartments planned through office conversions has climbed from 12,100 in 2021 to 55,300 in 2024, now accounting for 38% of the 147,000 adaptive reuse units expected to deliver in coming years.
It’s not just legacy buildings being salvaged anymore. The average age of office buildings undergoing conversion is now 72 years, nearly two decades younger than in past cycles. This shift reflects a broader trend: office repositioning is no longer a strategy of last resort. It’s becoming a proactive, forward-looking approach to unlock value from well-located but underutilized assets.
This movement isn’t just developer-led, it’s policy-backed. Through initiatives like DC’s Housing in Downtown Abatement Act, the District is actively positioning itself as a national model for urban reinvention supporting residential and non-residential conversions alike. For instance, Arlington County’s “Transforming Office Buildings” initiative connects zoning reform with housing creation and commercial tax base stabilization, addressing both economic need and land use friction. In Montgomery County, Maryland, office properties with 50%+ vacancy can access expedited approvals and 20-year tax abatements. These policies are unlocking deals and accelerating timelines.
What are the stats?
Dulles South 1 and 2 | Office to Industrial
A 38,000 sf single-story office building near Dulles Airport. Our Avison Young Technologies data tools flagged it as a prime fit for redevelopment to 65,000 sf of small-bay industrial, which is a tightening category in the region. The result? A competitive, all-cash, as-is closing, from bid to close under 90 days. This wasn’t a distressed sale, it was a fully leased, cash-flowing office building. By converting from mid-$20s full-service office rents to upper-teens to low-$20s NNN industrial rents, the buyer unlocked a path to significantly higher net income. Even more compelling: the asset transitioned into a category where cap rates are often 40–50% lower than those for traditional office, dramatically enhancing valuation.
University Center I and II | Office to For-Sale Housing
This 17-acre Loudoun County site offered the rare combination of acreage, ideal topography, and a red-hot residential market with outsale values that justified aggressive finished lot pricing today. In a region where developable land is nearly gone, a site burdened by two single story office buildings still shines like gold in the eyes of a builder. The 84% leased office traded for $200 psf, about 50% premium to traditional office values in Northern Virginia. No rezoning was required for closing. Our office to anything team believed the value was always there; it just needed to be unlocked and marketed to the right buyer pool.
What are the markets saying?
It’s not just about aging buildings, it’s about market momentum. Industrial rents rose 1.3% in 2024, while office rents stayed flat or declined. Infill industrial developments offer high single-digit yields on cost, often with faster lease-up than traditional apartment developments. Office allocations are shrinking, while capital flowing into specialty assets like data centers, build-to-rent, and self-storage is up 26%. The 'office to anything' thesis aligns not only with feasibility and fundamentals, but with the changing capital priorities of today’s investors.
Nowhere is this more pronounced than in data centers. The U.S. faces a projected shortfall of over 20 gigawatts (GW) by 2028, yet land with power and fiber access is increasingly scarce. Aging office properties on the right infrastructure corridors, especially in Northern Virginia, are trading at 2 times their former office value, often in the range of $4M+ per acre. In some cases, cap rates are compressing by 250 basis points on the in-place net operating income just by reframing the story from today’s rent roll to tomorrow’s redevelopment.
Most cities with 20%+ office vacancy have little conversion activity outside of multifamily. This is a blind spot and a massive first-mover advantage for those willing to act. Cities are starting to catch on, expanding adaptive reuse incentives to include industrial, educational, or mixed-use conversions. But as more owners discover this strategy and capital floods in, premiums will shrink.
So, what now?
If you own an underutilized office, you have two paths: wait for a return to the past or reimagine the future. In today’s real estate market, ‘office to anything’ isn’t just a pivot. It’s the path forward. The obstacle is the way.
Reach out to our experts to learn more about how to make the most of this opportunity.
Grant Hayes
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- U.S. Multifamily & Client Data Solutions Lead
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- Capital Markets Group
- Multifamily
- Market Intelligence
