Office Conversion Value Calculator
How Office Conversions Work
According to the article, empty office spaces can be converted into apartments, senior living centers, or data centers. The federal government offers tax credits for these conversions. Costs average $50-$100 per square foot, but the potential value can be 2-3 times higher than leaving the space vacant.
Enter your office space size to see potential conversion value
It’s 2026, and the headlines are loud: commercial real estate is collapsing. Banks are pulling back. Office towers sit half-empty. Retail spaces are turning into distribution hubs. Landlords are slashing rents. But is this really a recession-or just a painful reset? The answer isn’t black and white. Let’s cut through the noise with hard numbers, real-world examples, and what’s actually happening on the ground.
Office Space: The Biggest Warning Sign
Office vacancy rates in major U.S. cities hit 20.3% in Q4 2025, according to CBRE’s latest report. That’s the highest level since 1990. In downtown Chicago, nearly 1 in 3 office floors are empty. San Francisco’s vacancy rate? 28%. That’s not a blip. That’s a structural shift.
Why? Hybrid work didn’t fade away-it stuck. Companies that once paid $50/sq. ft. for Class A space now pay $30 for smaller, flexible units. Some are ditching whole floors. Others are converting offices into labs, data centers, or senior living spaces. JPMorgan Chase cut its NYC office footprint by 40%. Goldman Sachs followed. These aren’t startups. These are the anchors of the commercial market.
The result? Office property values have dropped 25-35% since 2022, per CoStar. Loans tied to these buildings are defaulting. A 2025 study by the Federal Reserve found that nearly 18% of commercial mortgage-backed securities (CMBS) with office exposure are now in special servicing-meaning they’re at risk of foreclosure.
Retail Isn’t Dead-It’s Changing
While office space is in freefall, retail is doing something stranger: adapting. Big-box stores like Walmart and Target are thriving. Their locations are still packed. But malls? They’re turning into ghost towns. The National Association of Realtors reports that 17% of U.S. malls had over 50% vacancy in 2025. That’s up from 9% in 2020.
What’s replacing them? Last-mile fulfillment centers. Amazon, Walmart, and Target are leasing former retail spaces to handle same-day deliveries. In Phoenix, a shuttered Sears became a 200,000-square-foot warehouse. In Atlanta, a mall’s food court now houses three drone delivery hubs. Retail space isn’t disappearing-it’s being repurposed.
Meanwhile, grocery-anchored centers are holding their value. People still need food. They still drive to them. These properties are seeing rent growth of 4-6% annually, even as other retail plummets.
Industrial Is the Bright Spot
If you’re looking for a commercial real estate success story, look at warehouses. Industrial vacancy rates in the U.S. sit at 4.1%-the lowest in 20 years. Rents have climbed 12% in the last year alone. Why? E-commerce isn’t slowing down. It’s accelerating.
In 2025, Amazon added 30 new fulfillment centers. FedEx and UPS expanded their regional hubs. Even small businesses are using third-party logistics to avoid owning their own warehouses. The demand for space within 15 miles of major cities is outpacing supply. New construction is happening-but it’s not enough. Land prices near rail yards and highways are up 40% since 2022.
Industrial is the one sector where developers are still breaking ground. And investors? They’re pouring money in. In 2025, institutional buyers spent $110 billion on industrial assets-up 22% from the year before.
Hotels and Multifamily: Mixed Signals
Hotels are rebounding. Business travel is back-just not like before. Conferences are happening again. Corporate travel budgets are up 18% since 2023. But the high-end luxury hotels? They’re still struggling. Travelers are choosing mid-range chains like Hilton Garden Inn or Marriott Residence Inn. These properties have occupancy rates above 70%. The ones with 200+ rooms and rooftop bars? Not so much.
Multifamily-apartment buildings-is holding steady. Rent growth has slowed to 1.5% nationally, but demand remains strong. The U.S. still needs 4 million more housing units. That’s not going away. Urban cores are seeing slower leasing, but suburbs and exurbs? They’re full. Developers are shifting focus from downtown towers to 4-6 story buildings near transit hubs.
Is This a Recession? Let’s Define It
A recession isn’t just falling prices. It’s sustained decline across multiple sectors, with job losses, credit tightening, and widespread uncertainty. Commercial real estate is facing a sector-specific crisis-not a broad economic collapse.
Unlike the 2008 financial crisis, banks aren’t failing. The banking system is still healthy. The Fed’s commercial lending standards tightened, but they’re not frozen. Loans are being restructured, not foreclosed en masse. The government isn’t bailing out developers. Instead, it’s offering tax incentives for repurposing buildings into housing or data centers.
And here’s the key: the market isn’t broken. It’s evolving. The old model-long-term leases, rigid office layouts, mall-centric retail-is over. The new model is flexible, adaptive, and tech-driven.
What’s Next? Three Scenarios
There are three paths forward:
- Slow Recovery: Offices stabilize at 15% vacancy. Retail continues its shift to experiential and fulfillment uses. Industrial keeps growing. Values flatline for 3-5 years. This is the most likely outcome.
- Deep Correction: Interest rates stay high. Banks tighten further. Foreclosures spike. Prices drop another 20-30%. This could trigger a broader credit crunch. Unlikely, but possible if inflation returns.
- Transformation Boom: Governments and private investors fund large-scale building conversions. Offices become housing. Malls become tech campuses. This could create new asset classes and unlock trillions in value. It’s already starting in cities like Detroit, Cleveland, and Milwaukee.
What Should You Do?
If you’re a landlord: Don’t panic. Renegotiate leases. Offer tenant improvements. Convert unused space. Talk to local planners about zoning changes.
If you’re a buyer: Look for distressed assets with conversion potential. Industrial and grocery-anchored retail are still solid. Avoid Class A office towers unless they’re in cities with strong population growth.
If you’re an investor: Diversify. Put money into industrial, multifamily, and adaptive reuse funds. Avoid overpaying for legacy office assets.
The commercial real estate market isn’t dead. It’s being rebuilt. The winners won’t be the ones clinging to the past. They’ll be the ones rethinking what space is for.
Is commercial real estate in a recession in 2026?
Not in the classic sense. There’s no broad economic collapse. But certain sectors-especially office space-are in a deep, sector-specific downturn. Vacancy rates are at historic highs, values have dropped sharply, and loan defaults are rising. However, other sectors like industrial and grocery retail are thriving. It’s a mixed picture: some parts are in crisis, others are booming.
Which commercial property types are losing value the most?
Class A office buildings in major metropolitan areas are losing value the fastest. Since 2022, prices have dropped 25-35% on average, with some cities like San Francisco and Chicago seeing declines over 40%. High-end retail malls are also falling sharply, especially those without grocery anchors or entertainment options. These assets were built for a pre-pandemic, in-office world-and that world is gone.
Are there any commercial real estate sectors still growing?
Yes. Industrial properties-warehouses, distribution centers, and last-mile logistics hubs-are seeing the strongest growth. Vacancy rates are at a 20-year low of 4.1%, and rents are up 12% in 2025 alone. Grocery-anchored retail centers are also holding value, with rent growth of 4-6%. Hotels are rebounding as business travel returns, especially mid-scale brands.
Why are banks pulling back on commercial real estate loans?
Banks are pulling back because many commercial loans originated between 2019 and 2022 are now maturing-and their borrowers can’t refinance at today’s higher rates. A $20 million loan taken out at 3% interest is now due, but refinancing would cost 7%. Many borrowers are defaulting. Banks are also facing tighter capital rules under Basel III. They’re reducing exposure to risky sectors like office and malls to protect their balance sheets.
Can office buildings be turned into something else?
Absolutely. Many are already being converted. In cities like Pittsburgh and Minneapolis, empty offices are becoming apartments, senior living centers, and even data centers. The federal government even offers tax credits under the Opportunity Zone program for these conversions. The key is location: buildings near transit, schools, or hospitals have the highest conversion potential. Retrofitting costs $50-$100 per square foot, but the payoff can be 2-3x higher than leaving it vacant.
