“Over One-Third of Adaptive Reuse Projects Now Include Hotel Conversions, According to Yardi Matrix Data”

In 2023, for the first time in history, hotel to apartment conversion projects surpassed office-to-residential conversions. According to data, hotels represented over one-third of all adaptive reuse projects in the U.S., delivering over 4,500 units.

RentCafe’s analysis of Yardi Matrix data revealed that hotels made up 36% of the total building conversions in 2023, the largest share among the group. Office buildings accounted for 28% of adaptive reuse projects, followed by factories (15%), warehouses (9%), and others (12%).

The adaptive reuse market is set for further expansion with 151,000 apartments currently undergoing conversion, as per RentCafe’s analysis. Doug Ressler, Senior Analyst & Manager of Business Intelligence at Yardi Matrix, noted a split between high-end and low-end markets in the adaptive reuse market. He highlighted that many office vacancies are found in older buildings with reduced functionality and lack of modern amenities.

In 2023, over 12,700 new apartments were converted, marking a significant 17.6% increase from the previous year. Hotels accounted for 4,556 of these units.

Most hotel to apartment conversions are from Class B hotels. These projects can be completed faster and at a lower cost than office building conversions due to existing floor plans, water systems, and waste lines that are relatively easier to modify.

However, some underutilized hotels are located in city centers while others are in less desirable locations next to airports or off major highways far from residential communities. These factors can reduce the value and appeal of residential conversions, according to Chris Walker from Aufgang Architects. He suggested these issues could be less concerning when converting hotels to affordable or supportive housing rather than market rate.

Manhattan, N.Y., emerged as a hotspot for hotel conversion projects in 2023. All of its 733 converted units came from repurposing hotels, making Manhattan home to nearly 6% of all converted apartments in the U.S., as per RentCafe. Other cities with a high number of converted apartments from hotels include Albuquerque, N.M., Richmond, Va., and Hialeah, Fla.

Source: bdcnetwork.com

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