The City of Dallas is set to be one of the leading real estate markets in the country for adaptive reuse projects.
“Adaptive reuse” refers to the development process of repurposing old commercial buildings into modern multifamily apartment complexes or for a purpose other than what the building was designed for.
The City of Dallas is ranked No.10 on a list of the top 20 U.S. cities for future apartment conversions, according to a new report compiled by RentCafe using apartment data from Yardi Matrix. Future conversions include all projects that are planned, under conversion, or identified as prospective redevelopments.
According to RentCafe’s annual adaptive reuse report, Dallas has a little more than 1,900 units in the development pipeline, a nearly 60% increase since 2021, when future projects totaled around 1,200 units.
It’s not just local office buildings that are being retrofitted into apartment units — some Dallas-area hotels and factories are also candidates for future conversion.
Information provided to The Dallas Express from RentCafe shows that the City of Dallas will yield approximately 1,498 new apartments from office building conversions, 314 from hotel conversions, and about 100 from factory conversions.
Of the roughly 1,500 units created by office-to-apartment conversions, about 850 units will reportedly replace historic office buildings along Elm Street, RentCafe Communication Specialist Felicity Domentii told The Dallas Express in an email.
Even though the market for adaptive reuse projects in Dallas is projected to grow, the City reportedly failed to transform any units in 2022. While several factors influenced last year’s performance, much of the slowdown resulted from soaring interest rates, decades-high inflation, general market uncertainty, and regulatory hurdles.
One of the most prevalent issues developers have faced in recent years is the City’s slow permit approval process. Permit turnaround times for single-family and commercial projects have been a point of contention for the development community under Dallas City Manager T.C. Broadnax.
For example, Dallas’ Development Services Department (DSD) logged a 52.5% decline in approvals in June, with a median turnaround of 25 days, according to the City’s residential permit activity dashboard. From 2021 to 2022, permit turnaround times often took 2-3 months, depending on the scope and size of the project.
Former Dallas Builders Association Executive Officer Phil Crone previously told The Dallas Express that such unexpected delays regularly result in hundreds of extra dollars spent each day.
As Doug Ressler, senior analyst & manager of business intelligence at Yardi Matrix, said, “the conversion of office spaces into multifamily units will primarily be restricted to smaller, older office properties due to factors such as construction costs and regulations related to residential construction.”
The regulatory hoops developers must jump through to get a project off the ground include processes like platting. Zoning can also come into play, for instance, when a district must be rezoned from commercial office use to multifamily residential use.
As of July 2023, Dallas has more than 1,900 adaptive reuse units in the pipeline. However, due to the aforementioned hurdles involving apartment conversions, only about 20% of the forthcoming projects are actively under construction, with the remaining 80% still in the planning stage.
Besides Dallas, Houston was the only other Texas city to make the list for the number of adaptive reuse projects in development. According to the data, Houston ranked No.7, with approximately 2,205 units in its project pipeline.
The first-place winner was Los Angeles, California, with 4,566 future adaptive reuse units in the pipeline, about 2,654 more than Dallas.
To read RentCafe’s full report, click here.
