Hotel-to-residential beats out office conversions in 2024

In a recent RentCafe market insights report, the wave of adaptive reuse projects has seen record gains. In 2024, the number of apartments resulting from converted buildings was 24,735—a 50% increase compared to the amount of units delivered in the previous year.

Of the nearly 25,000 apartment units converted, a significant amount come from a surprising place. No, not office-to-residential, but hotel conversions.

Hotel-to-Apartment Conversions Reach Record Numbers in 2024

The hotel sector led with one-third of apartment conversions last year. There were more than 9,100 new hotel-to-apartment units delivered in 2024. Office-to-res saw 5,900 new units, while former school buildings resulted in nearly 2,000 new apartments being created across the U.S. in 2024.

"Last year, developers focused almost exclusively on outdated hospitality buildings for adaptive reuse investments," the report states. "As a result, more than 93% of newly converted apartments originated from Class B and C hotels, which are also more vulnerable to market uncertainty."

Hotel conversions have been steadily increasing since 2018, while office-to-res took a dip in 2020–2022. However, school adaptive reuse projects surged significantly in 2024.

School Residential Conversions: The Fastest Growing Type in 2024

Apartments that came from retired school buildings quadrupled in 2024 compared to 2023. In 2023, school conversions made up just 3% of all new adaptive reuse apartments—in 2024, that number jumped to nearly eight percent.

"The reasons behind this growth include declining student enrollment numbers in some urban areas, as well as the high costs of renovating historic buildings," the report states. "Many of these schools were built in the late 19th to early 20th century and required extensive work."

The Top 10 Cities For Apartment Conversions in 2024

But where are most of these conversions taking place? Chicago leads the nation as the most active city for repurposing buildings, dethroning Manhattan, N.Y.

Chicago saw 880 new converted units delivered in 2024. Denver, Colo., came close with 789 units, followed by Philadelphia, Pa., at 761.

"Keep in mind that each location in the top 10 cities by number of converted apartments in 2024 delivered more than 500 apartments, a significant change compared to 2023, when most cities had completed around 300 units," the report states.