The office market may be on the verge of a new era. This year, the amount of office space that will be either demolished or converted to other purposes will exceed new office space deliveries for the first time in 25 years, according to a new report by CBRE.

The commercial real estate services and investment company reports that among the 58 major markets that it tracks, 23.3 million square feet of office space will be removed from the market this year. That includes 12.8 million square feet of office space that is slated for conversion and 10.5 million square feet that will be demolished. At the same time, only 12.7 million square feet of new office space is expected to be delivered.

CBRE writes that both demolition and conversion activity have accelerated since the pandemic. Currently, more than 81 million square feet of office space is planned for other purposes or is in the process of being converted. Those projects are happening in 44 markets and account for 1.9% of total U.S. office inventory. However, office vacancy rates have yet to budge, remaining at about 19% in the first quarter of 2025.

The conversion trend has gained momentum during the past decade, with an average of 58 office conversions annually since 2018. In 2024 alone, 94 conversion projects totaling 13.1 million square feet were completed. This year, approximately 68 conversion projects are expected to be completed.

CBRE forecasts that by 2027, there could be 263 conversion projects planned or underway totaling more than 60 million square feet. Conversions are dominated by the construction of multifamily housing, which currently accounts for about 76% of all projects. Other uses include converting office space into hotels, life science facilities and industrial properties.

The conversion activity varies greatly depending on building configuration, values, inventory age, construction costs and the availability of experienced developers. Manhattan leads in the total square footage being converted at 10.3 million. Washington, D.C., is second at about 9.2 million square feet. Cleveland has the highest share of its office inventory, at 8.4%, either undergoing or planned for conversion.

Conversion of outdated office buildings is an important factor in revitalizing some city centers. But not all buildings are candidates for conversion.

Many of the office towers built in the 1970s and ’80s are poor candidates for multifamily housing because their large square footage makes it difficult to divide all the floor space into dwelling units with windows and natural light. As a result, these older buildings account for more than half of demolitions and only 35% of conversions.