Office-to-Residential Conversions in Philadelphia

In the last few years, there has been a permanent shift in the way people work. Today, around 14% of American adults work from home on a full-time basis. Thanks to this tectonic shift, the market has had to adjust. Companies don’t need as many office buildings, so many of these structures are getting converted into apartments.

Commercial Supply Meets Residential Demand

About 15 years before the pandemic, the office vacancy rate in Philadelphia was between 12% and 15%. Now, this figure is higher than 23%. Office buildings have also dropped in valuation. At the Wanamaker building, the vacancy rate is 65%.

Fortunately, office-to-apartment conversions are proving to be an effective way to handle the excess supply of office buildings. Philadelphia residents need better access to apartments, and office buildings have space to spare.

The Best Examples of Office-to-Apartment Building Conversions

However, the process of conversions isn’t always easy. Depending on the office building, the conversion can easily cost over $300 per square foot. Currently, there are several successful examples of office-to-apartment conversions that developers and residents can turn to for inspiration.

Compared to most parts of the country, the region has some of the hottest examples of office conversions. In 2024, 975 conversions are expected to take place. By converting underused office space, Philadelphia can create new housing and avoid having vacant buildings. Nationally, there are expected to be around 55,300 new apartments because of these conversions.

1701 Market Street

One of the most notable office-to-apartment conversions in the city is at the former headquarters of the Morgan Lewis & Bockius law firm. The conversion is expected to take until 2025. Once it is finished, it will have around 300 apartment units. Already, a portion of this building has been converted into parking spaces for future residents.

Originally constructed in 1957, this historic building has an exterior design that is made out of Indiana limestone. This high-rise structure stands 18 stories tall and boasts exceptional views of the city. On the roof terrace, residents will find an outdoor screening lounge, sunset lounges, a heated pool, barbecue grills, cabanas, and a dog run.

Within the building, future tenants can enjoy a variety of health and wellness amenities. Charging stations for electric vehicles can be found in the four-story garage.

Three Parkway

Over the next few years, the recently sold Three Parkway will be converted into residential units. This 20-story building was first constructed in 1970, and it has served as an office building for decades. Now, the bottom half of the building will be converted into residential units. Once it is completed, the building is expected to have about 175 residential units.

Designed with bicycle storage, these residential apartments are protected by the GPS Needlepoint BiPolar Ionization and MERV-13 filters. Tenants can enjoy having access to an on-site fitness center and locker rooms. From the complex, residents can easily reach Cret Park, Sister Cities Park, Logan Square, and the Schuylkill River Trail.

2100 to 2112 Arch Street

Spanning eight stories in height, this commercial building was recently sold in 2023. Philadelphia developer MM Partners bought the complex from the Jewish Federation of Greater Philadelphia with the goal of transforming it into a mixed-use building. The developers have already applied for and received zoning approval to turn the building into a residential conversion. On the ground floor, there will still be a commercial space.

Originally built in 1913, this 121,500-square-foot building previously leased offices to nonprofits. Currently, a timeline for the project hasn’t been released.

The developers behind the commercial-to-residential project have already finished more than a dozen other projects like this one. Previously, they converted the AF Bornot Dye Works and a Manayunk industrial warehouse.

Meeting the Future: More Office Conversions Are Expected

Philadelphia isn’t the only place that could be getting an office makeover. In one study, around 25% of office buildings were found to be suitable for an office-to-residential conversion.

Despite the upfront investment, these office conversions are significantly more sustainable than the alternative. The average conversion is 30% less expensive than building an entirely new complex. Additionally, these projects are typically much faster to complete than demolish-and-rebuild projects.

However, there are many complexities that Philadelphia developers must overcome. A commercial-to-residential conversion must figure out how to redesign large floor plates. To become residential, most office buildings need updates to their exterior-opening windows and floor-to-floor height. Sewers, elevator access, and heating units must be updated as well.

Philadelphia Has Many Office-to-Residential Conversions Underway

Already, there are more office-to-residential conversions underway in Philadelphia. Over time, these new conversions will change the office market. From alleviating housing pressure to reducing troubled commercial loans, these conversions will have a major impact on developers, residents, and local businesses.