Houston’s office conversion pipeline hits 5M sf

Houston is riding the wave of a nationwide trend in office conversions, showcasing its adaptability on a new urban frontier. 

The Bayou City was ranked fourth in the nation for conversions, according to a new CBRE report, with incentives and local government support putting 2.3 percent of Greater Houston’s office inventory into play for conversion. Cleveland leads the nation with 11 percent of its office inventory slated for conversion while Cincinnati and Boston round out the top three with nearly seven percent and three percent, respectively. 

Houston benefits from a combination of the old–as in aging office buildings–and the new in terms of a growing population in its metro area.

“The availability of older, noncompetitive office buildings and continued population growth make Houston a prime candidate for conversions to multifamily and other uses,” said John Spafford, CBRE executive vice president. 

Houston’s 2.3 percent of properties now marked for conversion equates to about 5 million square feet as of September 30, according to the report. That’s a 316% increase compared to the volume of conversions between 2016 and 2022. 

Within Houston’s office conversions, office-to-mixed-use plans total about 40 percent of the pipeline, while office-to-multifamily comprises an additional 30 percent. 

The conversions are seen as a way to breathe new life into aging office buildings and also match housing and other uses with the area’s expanding population. Submarkets such as the Galleria, West Houston and Downtown are focal points of transformations, according to the CBRE report.  Starwood Property Trust is still ironing out the details of converting the Galleria’s massive 41-story Marathon Tower into a high-rise apartment complex after acquiring it via a foreclosure sale last summer. Local developer Cameron Management is planning a resi conversion of the allegedly haunted Niels and Mellie Esperson Buildings at 808 and 815 Travis Street in the heart of downtown Houston. 

The trend extends beyond Houston, too, with a staggering 60 million square feet of office conversions either planned or already underway. The total accounts for 1.4 percent of the total U.S. office inventory, up from 1.2 percent in the previous year’s fourth quarter. Nationwide, office-to-multifamily conversions account for the majority of office conversions while office-to-mixed-use conversions only constitute 18 percent of the pipeline, up from seven percent last year.

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