T
he office conversion and demolition trend is gaining momentum, with more space being torn down or repurposed than built from scratch this year. According to CBRE Group data, a record 23.3 million square feet of office space across the US's largest markets will be demolished or converted by 2025, while just 12.7 million square feet of new construction is planned.

    This seismic shift marks a lasting impact of remote work culture on commercial real estate. Barry DiRaimondo, CEO of SteelWave, notes that many offices are functionally obsolete and that the decline in office construction could be beneficial for both developers and tenants. Office vacancies remain high at 19%, but leasing activity has picked up as companies pressure employees to return to their cubicles.

    The decline of office construction is expected to stabilize rents as demand grows, benefiting building owners and investors. Luxury office owners will particularly benefit from a reduced supply of new offices, while well-positioned developers can capitalize on office-to-residential conversions. New York City is leading the pack in these conversions, with over 8,000 new apartments expected from repurposed office buildings.

    Developers have primed 85 million square feet of former office space for conversion, and successful projects like FiDi's 25 Water St. are setting records as the largest office-to-residential conversions in the country. The trend is also boosting housing supplies and cheaper rents, offering a silver lining to the decline of office construction.