How New Adaptive Reuse Trends Are Changing Multifamily Conversions

Hotel-To-Apartment Conversions Overtake Office-To-Residential & Point to a Continued Multifamily Construction Renaissance

How New Adaptive Reuse Trends Are Changing Multifamily Conversions

Hotel-To-Apartment Conversions Overtake Office-To-Residential & Point to a Continued Multifamily Construction Renaissance

New York City continues to lead the adaptive reuse charge. That fact is unsurprising, since New York is facing a shortage of apartments, especially affordable housing. The surprise comes from the fact that most of the apartments created in 2023 in the U.S. came from repurposing hotels instead of office space.

Historic blonde brick building with arched stonework and a hotel sign above it in red sits amid buildings in Manhattan
Class B hotels in major metro areas are driving multifamily adaptive reuse projects in 2024.
These buildings pose unique challenges for architects and virtual design consultants.

Another surprise is that warehouse conversions, the arguable genesis of adaptive reuse from decades past, are making a significant comeback, with a 9% increase in 2023.

What is Adaptive Reuse?

Adaptive reuse – the practice of converting offices, storefronts, hotels, or industrial buildings for other uses like multifamily residential dwellings – has seen a resurgence in popularity. In the face of still-towering vacancies in major U.S. metro office spaces and high commercial interest rates, developers, architects, investors, and management firms are all driving the push toward repurposing buildings for residential use.

Gone, however, may be the days of the cheap industrial studio. After a considerable dip in apartment size in 2022, the average square footage per unit rebounded to 916 in 2023, with two and three-bedroom units leading the charge toward larger abodes, according to data analysis from Yardi Matrix, owner of RentCafe.

Hotel conversions, on the other hand, may offer “a creative solution to the U.S. endemic housing shortage and affordability crisis,” according to Ted Jung of Parkview Financial.

One of the interesting data points teased out by Yardi Matrix was a potential growing divergence in adaptive reuse housing, citing a “bifurcation between high-end and low-end markets… 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.”

Most of the hotels being converted are considered “Class B” buildings. A Class B building is generally 20+ years old, with ordinary architectural design, floor plans and finish work. They generally lack high ceilings, and up-to-date amenities, which may make them a prime blank slate of sorts for enterprising VDCs, architects, and developers looking to provide more affordable multifamily housing solutions in metro areas.

What is Driving Hotel to Multifamily Conversions?

In a word, convenience. Some of the most daunting issues facing virtual design consultants, architects, and engineers in adaptive reuse for office and industrial spaces are reduced when converting a hotel because it is already designed with exterior/ambient light, plumbing, and elevator access for every room baked in.

Another driver is that hotels had been one of the slower economic sectors to rebound after Covid-19, and many property owners went in search of new ways to generate revenue.

While on its face, the hotel to multifamily conversion may seem a slam dunk, there are key differences that AEC and VDC professionals must take into account when planning a new adaptive reuse project.

  • Size: As previously stated, apartment hunters are driving a surge in square footage and two to three-bedroom units. The average American hotel room contains just 330 square feet, about one-third the size required. So, at minimum, you have to plan for a 3:1 conversion ratio, and need to allow for all the MEP revision and renovations turning two or three hotel rooms into one apartment will require. Knowing the precise existing conditions of the project, above and below-ground, can inform design decisions, construction plans, and help keep the project on time, on budget, and safe. Learn more about how GPRS can provide full site existing conditions documentation, here.
  • Zoning & Local Ordinances: Many major U.S. cities have enacted programs to speed the regulatory process for adaptive reuse. New York City created an Office Adaptive Use Task Force, and the city’s 2025 fiscal budget includes incentives for adaptive reuse proposals. Checking your local zoning and city ordinances may yield surprising support for an adaptive reuse project, or could alert you to regulatory hurdles you may need to overcome.
  • Location, Location, Location: Is a hotel near the airport or in the middle of a tourism destination the best choice for multifamily adaptive reuse? People think very differently about where they want to call home compared to where they’re willing to rest their head for a night. So, conducting some geocentric market research may help to avoid a bright, shiny new apartment building with few tenants.
  • Budget: As the economy continues to chug along, so have costs and commercial lending rates. Know your loan-to-cost ratio limits, have solid, fact-based projections for management expenses once the conversion is complete, and remember that you may have to shop a few lenders to find the right fit for your project. Making sure you can keep a lid on construction cost overruns can be a key component of getting an adaptive reuse project off on the right foot. GPRS’ construction and facility management software platform, SiteMap®, provides a single source of truth for general contractors, subcontractors, and stakeholders to avoid clashes, reworks, and mistakes that can blow your budget. Learn more about SiteMap®, here.
  • Getting Out: What’s the developer’s plan post-construction? Selling to an investor? Waiting until they’ve completed lease-up? Or do they plan to keep the building in their portfolio long-term? Planning from the start based on when you plan to exit the project – hopefully with a nice, fat payday – can inform many design and construction decisions along the way.

According to RentCafe’s data, 12,700 new apartments were converted in 2023 – a 17.6% uptick – and another 151,000 units are currently under conversion in 2024, pointing to a continuing, long-term multifamily housing adaptive reuse trend.

Everything Old is New Again

Meanwhile, another driver of adaptive reuse is repurposing historic buildings into boutique hotels. New hotels like the Atheneum Suite Hotel in Detroit, Michigan, previously a seed company warehouse constructed in 1879, The Kendall House in Cambridge, Massachusetts, a fire engine house originally built in 1894, and the El Convento Hotel in San Jaun, Puerto Rico, a Carmelite convent dating to 1649, are among the top 25 Historic Hotels of America picks for their Best of Adaptive Reuse list.

An exterior corner shot of Kingston, New York’s Hotel Kinsley, developed inside the historic State of New York National Bank building constructed in the 1860s.
New York’s historic Hotel Kinsley is an example of the adaptive reuse trend of turning historical buildings into boutique hotels.
It repurposes a bank built in the 1860s.

Learn more about how GPRS supports commercial adaptive reuse projects, here.

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Frequently Asked Questions

What are the primary benefits of using virtual design consultants for adaptive reuse projects?

Cost and Time Efficiency: Leveraging digital tools and virtual collaboration reduces the need for frequent on-site visits, saving time and reducing costs.

Enhanced Visualization: Advanced visualization techniques, such as virtual reality (VR) and augmented reality (AR), provide stakeholders with a clear understanding of proposed designs and modifications.

Flexible Collaboration: Virtual platforms facilitate seamless communication and collaboration among architects, engineers, and clients, regardless of their physical location.

Sustainability and Innovation: Consultants can explore sustainable design strategies and innovative uses of space, often integrating eco-friendly materials and energy-efficient systems tailored to the existing structure.

How do virtual design consultants manage the challenges of transforming older buildings into modern multifamily developments?

Structural Limitations: They use advanced structural analysis tools to identify and reinforce areas needing support while preserving as much of the original structure as possible.

Space Optimization: Consultants employ creative design solutions to maximize the use of existing spaces, often reimagining layouts to suit modern living requirements while retaining the building's character.

Compliance with Contemporary Standards & Building Codes: Ensuring the building meets current safety, accessibility, and energy efficiency standards is crucial. Consultants use up-to-date knowledge and digital simulations to foresee and address compliance issues.

Integration of Modern Amenities: They look to seamlessly integrate modern amenities, such as updated HVAC systems, plumbing, and electrical infrastructure, into older buildings, enhancing functionality without compromising aesthetic value.