A billion square feet of new housing space to emerge in cities as Americas office market faces a major crisis

America’s office market is teetering on the edge of a massive shake-up as rising debt and the permanent shift to remote work leave countless office buildings across the country vacant and struggling.In response, experts predict a wave of fire sales and conversions that will turn these once-bustling office towers into much-needed residential housing.

With vacancy rates as high as 80% in some Class B office buildings — the older, less attractive properties in need of renovations — the clock is ticking for landlords and banks.“The banks are going to have to dispose of that real estate,” Richard Barkham, chief global economist for CBRE, said in an interview with Business Insider.

“I think we’ll see a wave of offices going back to banks … they’ll be firesold and either demolished or converted.” Already, large financial institutions are shedding these troubled assets from their balance sheets, with the total amount of commercial real estate loans held by banks dropping to $2.9 trillion from a peak of $3 trillion earlier this year.Some of the hardest-hit properties are expected to be part of the growing trend of office-to-apartment conversions — a transformation that has taken off since the pandemic.

In 2024, the number of office spaces being converted into apartments surged to 55,000, a staggering 357% jump from 2021, according to data from Yardi Matrix.“There’s a solid base of really badly performing offices that’s going to go bust over the course of 2025,” Barkham said.

“It’s quite clear that we don’t need as much office space in the United States as we did.” While high-end properties in prime locations are still attracting tenants, the remote work revolution has left the broader office market in shambles.National office vacancy rates hit 19.4% in August, marking a sharp increase from the previous year, according to CommercialEdge.

As more offices sit empty, the opportunity to repurpose these buildings is gaining steam.John Va...