The push to repurpose underused office buildings into residential housing is gaining traction across California, as state and local leaders attempt to address two pressing challenges: rising office vacancies and an ongoing housing shortage.
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In the aftermath of the COVID-19 pandemic, office markets in major cities have struggled to recover. Vacancy rates remain elevated, particularly in San Francisco and Los Angeles, where unused commercial space has become increasingly common. At the same time, demand for housing continues to outpace supply, prompting policymakers to look toward adaptive reuse as a viable solution.
Design firm Gensler has even identified adaptive reuse as a defining trend in its 2026 design forecast, reflecting the growing importance of converting obsolete buildings into livable spaces.
One of the most significant recent developments comes from Los Angeles, where city officials have taken steps to simplify the conversion process. In February, the Los Angeles City Council approved a Citywide Adaptive Reuse Ordinance aimed at reducing regulatory hurdles and encouraging developers to transform aging commercial properties into housing.
“Los Angeles seized on adaptive reuse as a core strategy of its adopted Housing Element Rezoning Program, which started with stakeholder outreach in 2023,” a spokesperson for the Los Angeles City Planning office said in an email.
Under the updated ordinance, buildings that are at least 15 years old can now qualify for conversion if they are located in designated zones, including commercial and multifamily areas. Even outdated parking structures or unused parking space within buildings can be repurposed into residential units.
“If you dial back the clock to the late ’90s when the first adaptive reuse ordinance came out, it transformed a lot of old bank buildings and commercial spaces into downtown’s first wave of residential development,” said Nella McOsker, president and CEO of the Central City Association of Los Angeles.
“You fast forward to now and we’re looking at a very different set of buildings — tall, enormous skyscrapers — and that’s a different kind of policy problem to solve.”
Despite these efforts, experts say regulatory changes alone may not be enough to unlock widespread conversions. While Los Angeles’ updated ordinance is seen as a step forward, additional reforms may still be necessary to make more projects financially viable.
“There’s a great new update to the adaptive reuse citywide ordinance that’s really permissive,” McOsker said. “But when you think about continuing to streamline building code and the layers of how the state is approaching this, L.A. still needs to spur more of these conversions in places where we know it’s viable.”
At the state level, lawmakers have also attempted to expand housing development opportunities. Legislation such as Assembly Bill 2011 and Senate Bill 6 allows residential construction in certain commercially zoned areas, but adoption has been limited.
“AB 2011, which was amended by AB 2243, has changed the legal landscape by creating a ministerial (i.e., no CEQA) approval pathway for qualifying housing development projects along commercial corridors, even if the property is not zoned for residential use,” said Caroline Chase, partner at the Los Angeles-based real estate law firm Allen Matkins.
“In exchange, the developer must provide on-site affordable housing and meet specified labor requirements, the latter of which has often been a deal-breaker for developers.”
A report by YIMBY Law underscores the limited uptake, noting that only a handful of projects were approved under AB 2011 in 2024, while none moved forward under SB 6 due to stricter labor conditions.
Beyond policy constraints, financial and structural barriers continue to hinder adaptive reuse projects.
A 2023 study by SPUR and the Urban Land Institute San Francisco found that conversion costs can range from $472,000 to $633,000 per unit, excluding additional expenses such as seismic upgrades—often required for older buildings in earthquake-prone regions.
“SB 6 has had little impact on San Francisco development because almost all zoning districts allow residential development,” said Charles Bloszies, a San Francisco-based architect and structural engineer.
“AB 2011 applies to 100% affordable housing, which San Francisco needs, but most developers cannot ‘pencil out’ 100% affordable housing due to high construction costs.”
Other challenges include complex building layouts, dense urban conditions, and stringent labor and safety requirements, all of which can significantly increase project costs and timelines.
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Still, there are signs of optimism. Bloszies pointed to new financing tools, such as tax increment financing tied to downtown revitalization districts, as potential catalysts for future projects.
“The latest creation of a downtown revitalization district includes funding for projects via tax increment financing,” he said. “This could be the tipping point needed to cause developers to move ahead with conversion projects.”
Looking ahead, adaptive reuse is expected to remain a key strategy in addressing California’s housing crisis, particularly in urban cores where land for new development is scarce. However, industry experts emphasize that meaningful progress will depend on aligning policy incentives with economic realities.
Streamlining permitting processes, reducing construction costs, and revisiting labor and affordability requirements could all play a role in accelerating conversions. Without such adjustments, many projects may continue to stall despite strong policy support.
As cities balance economic recovery with housing needs, the success of office-to-residential conversions will likely hinge on whether policymakers can bridge the gap between ambition and feasibility.
Originally reported by Keith Loria in Construction Dive.
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