Office space values have fallen so low that it is becoming more feasible for developers to convert a growing number of buildings to residential uses, according to research by CommercialCafe, a market analytics platform operated by Yardi Matrix, subsidiary of property management technology firm Yardi Systems.

The report found that nearly half of all office property transactions with two or more sales prices for comparison were discounted since 2024. The lower valuations mean that developers are now able to buy buildings at bargain prices and offset the costs associated with converting office space to residential uses.

CommercialCafe writes that in 2025, 11.8 million square feet of office space — a record amount — was in the process of being converted to multifamily uses.

By the start of July, Chicago had seen $1.18 billion worth of office space sold in 2026. But a considerable amount of that office space was sold at a discount. In fact, since 2024, nearly 60% of Chicago office space has sold at discounted prices.

The Windy City is estimated to have about 95 million square feet of office space that is considered suitable for conversion to residential uses. Chicago’s embrace of adaptive reuse also helped keep the city’s office vacancy rate at 17.8% in June.

However, landlords in other cities, including Seattle, have been slower to adopt office space conversions. Seattle’s vacancy rate was the second highest among the 25 largest metropolitan areas in the nation at 24.7% in June. Yet the Emerald City also has seen little adaptive-use activity among the estimated 47.5 million square feet of office space suitable for conversion.

The national office vacancy rate was 17.7% in June, down 170 basis points from one year ago. The national office listing rate for June averaged $33.67 per square foot, a 2.4% decline from values in June 2025. Of the 25 largest markets analyzed by CommercialCafe, 18 saw decreases in their respective vacancy rates year over year.

Among the largest metropolitan markets, San Francisco continued to have the highest office vacancy rate at 25.8% last month, followed by Seattle’s 24.7%. Austin, Texas, was third at 24.5% and Houston was fourth at 23.3%.

Sales of office space were brisk in the first half of the year, with 1,296 transactions worth more than $30 billion. Manhattan, as usual, led the way with sales worth $4.3 billion, followed by Dallas at $2.6 billion, San Francisco at $2.4 billion and California’s greater Bay Area at $2 billion.

As of June, nearly 30 million square feet of office space was under construction nationwide, and 11.1 million square feet had been delivered in U.S. markets. Boston had the most office space under construction with 3.4 million square feet, followed by Manhattan with 2.9 million square feet. Dallas was third with 2.89 million square feet, and San Diego was fourth with 1.73 million square feet under construction.

The major U.S. cities with the lowest level of office construction underway included Seattle, with about 20,000 square feet; Orlando, Fla., with about 100,000 square feet; and Chicago with about 160,000 square feet.