Office conversions have been discussed for years. But the activity showing up in July and August 2026 suggests the conversation is entering a different phase.
Recent data shows office fundamentals improving nationally, while older assets continue to trade at discounted values. At the same time, lenders and investors are putting real capital behind conversions, redevelopment, and recapitalizations.
That combination is creating a more immediate question for owners of older office properties: Is the building worth repositioning as office, converting to another use, or replacing altogether?
What Changed This Summer?
Three developments over the past several weeks make that question more relevant now.
1. The Office Recovery Is Becoming More Selective
The office market is improving, but not every building is recovering equally.
In its August 2026 Midyear Outlook, CBRE reported stronger leasing activity alongside historically limited new construction. Demolitions and conversions are expected to exceed new office completions again this year, further reducing supply.
Then, on August 25, CBRE made an important distinction: while office-to-residential conversions continue to attract attention, upgrading and repositioning existing office buildings may make more sense in some markets as quality space becomes increasingly scarce.
That changes the conversion discussion.
The decision is no longer simply whether an empty office can become apartments or industrial space. Owners now have to evaluate whether an older building can compete in a recovering office market before deciding to remove it from office inventory.
2. Lower Office Values Are Making Some Conversions More Feasible
At the end of July, Yardi Matrix reported that falling office values are creating better economics for office-to-multifamily redevelopment.
Nearly half of office properties with repeat sales since 2024 had traded at a discount, according to the report. Meanwhile, office-to-multifamily conversion activity reached a record level last year.
That matters because conversion economics often fail at the acquisition basis.
Construction costs, structural modifications, entitlement work, and lease-up risk can make a project difficult to justify if the existing office asset is still priced too aggressively. Lower acquisition bases can change that calculation.
If an office asset is being acquired or recapitalized at a new basis, that is the point to test the alternative-use strategy against the available financing. Lever can help evaluate the capital stack before the redevelopment plan is locked in.
3. Capital Is Actually Closing on Conversion Deals
Perhaps the strongest reason to discuss this topic now is what happened during August.
On August 19, a joint venture secured a $74.5 million loan from an Apollo affiliate to acquire and convert a 107,000-square-foot Stamford office property into luxury residences, according to Multi-Housing News.
Just days later, two office buildings totaling more than 511,000 square feet in Norwalk, Connecticut, sold to a venture planning a 286-unit residential conversion. Bank OZK provided a $75.5 million senior construction loan for the project.
And on August 20, a completed New Orleans office conversion was recapitalized with $120 million of bridge financing and preferred equity, according to Commercial Property Executive.
These deals do not mean every obsolete office asset is suddenly financeable.
They show something more useful: capital is returning selectively when the basis, redevelopment plan, location, and exit support the transaction.
Phoenix Shows the Same Shift
The activity is not limited to office-to-residential conversions.
In July, a developer proposed a 453,000-square-foot industrial project on a former GE and Honeywell office site in north Phoenix, near TSMC's expanding semiconductor campus, according to the Phoenix Business Journal.
That follows other Phoenix office-to-industrial redevelopment projects already underway.
In these situations, the existing structure may have little relevance to the future project. What matters is the location, land basis, zoning, infrastructure, and what the site can support under another use.
Three Strategies Owners Are Evaluating
The current market is creating three distinct paths for older office assets:
Office repositioning: Invest in the existing building so it can compete for tenants as demand concentrates in higher-quality space.
Adaptive reuse: Preserve much of the structure but change the property's use, most commonly to residential, hospitality, or another compatible use.
Demolition and redevelopment: Remove a functionally obsolete building when the underlying site can support a more valuable use.
The financing requirements can vary considerably across those strategies.
A repositioning may require bridge or renovation financing. A conversion may involve construction debt, incentives, tax credits, or structured equity. A full redevelopment may require an entirely new capital stack based on the future project rather than the current building.
Before significant equity goes into any of those paths, sponsors should understand what lenders will underwrite, how much leverage the completed project can support, and where a gap may appear in the capital stack.
How Lever Capital Partners Can Help
Lever Capital Partners works with sponsors evaluating complex repositioning, conversion, and redevelopment opportunities where the existing financing may no longer match the business plan.
Depending on the transaction, that can include bridge debt, construction financing, private credit, preferred equity, mezzanine capital, or a combination of capital sources structured around the redevelopment plan and anticipated takeout.
The recent activity in July and August does not mean every older office building should be converted. It means there is now enough movement in valuations, transactions, and financing to make the question worth revisiting.
If you are evaluating whether an office asset should be repositioned, converted, or redeveloped, talk to Lever about what the capital markets will support before committing to the next phase.