Hotels Took The Adaptive Reuse Crown In 2023
Hotels were the leading type of real estate converted for residential use last year, new data shows.
Former hotels undergoing adaptive reuse projects hit an all-time high across the nation at 4,556 units converted last year, according to a new report by RentCafe, which uses Yardi data counting repurposed projects of 50 units or more. Residential conversions were up 17.6% last year across property types.
Hotel reuse made up 36% of all conversion projects completed nationwide in 2023, outpacing office conversions, which added 3,587 units last year. Office conversions were the most prominent type of adaptive reuse in the U.S. over the last decade.
Hotel reuse projects rose by 38.8% from 2022 to 2023 and nearly doubled the volume from 2021, when 2,351 residential units were repurposed from hotels.
Hotels' existing infrastructure makes them particularly suitable to be converted to housing. Meanwhile, reduced travel and steep debt service were among the factors that led owners to offload closed or underperforming hospitality properties in 2023.
Manhattan led hotel-to-rental conversions at 733 units as it tackles its housing crisis and barriers to creating new buildings. In second place, Albuquerque, New Mexico, converted 300 units, and Richmond, Virginia, was in third place with 291.
Most of the development is concentrated in a handful of large projects.
In New York, a former hotel at 525 Lexington Ave. became 655 student apartments. Hotel Cascada on the intersection of Carlisle Boulevard and Interstate 40 in Albuquerque was converted into 300 rental units, and one of Richmond's Quality Inn & Suites was repurposed into 291 units.
Class-B hotels made up 60% of conversions, but higher-end properties were more likely to be converted than lower-end ones, with Class-A accounting for 21% and Class-C making up 18% of developments.
Hotels' spot at the top of the list may be an anomaly, as there are fewer hotel conversion plans in upcoming years. There are 151,000 apartment units underway, 39% of which are coming from former offices. Hotels make up 22% of the pipeline.
Warehouse conversions are also on the rise, with a 129% surge in the number of apartments repurposed from such properties, totaling 1,098 units last year. Those projects made up 9% of all conversions in the U.S. in 2023.
Learn more about converting to alternative use types and redeveloping existing assets at Bisnow's National National Repositioning & Adaptive Reuse Webinar on June 25. Register here.
