In the heart of Manhattan, the former headquarters of Pfizer “ into 1,600 residential apartments—the largest project of its kind in U.S. history. In London, more than 100,000 square feet of office space have been converted into homes over the past decade. Globally, the conversion of old office buildings into residential apartments (Office-to-Residential Conversion) has become a two-pronged solution: rescuing distressed office assets and providing housing units in the heart of densely populated cities.
However, when we look at the Saudi market, we find a deafening silence surrounding this solution. In Riyadh and Jeddah, many old office buildings (Classes B and C) on major commercial streets stand with low occupancy rates, while these same cities are experiencing massive demand for housing. Why aren’t we talking about this solution? Is it economically viable? And what are the engineering and regulatory challenges preventing us from replicating the global model?
In this investigation, we delve into the topic of "conversion,“ examine the numbers and challenges, and explore whether this is the future of older office buildings in Saudi Arabia.
The Numbers Speak: Why Repurposing Now?
To understand the drivers behind this global trend, we must look at the numbers. Following the COVID-19 pandemic and changing work patterns, office vacancy rates have risen globally. Meanwhile, major cities are grappling with a severe housing crisis.
In the United States, CBRE estimates that there are 10.3 million square feet of conversions underway or planned in New York alone. In the UK, converted offices accounted for 86.7% of the total new housing units resulting from changes in use between 2015 and 2023.
Class A is fully occupied
In Saudi Arabia, however, the picture appears different at first glance, JLL’s reports for the second quarter of 2025 indicate near-full occupancy rates for prime and Class A offices in Riyadh, where vacancy rates stood at 0.5% and 3.8%, respectively.
But the real story lies in the details. What about older buildings?
In Dammam, the vacancy rate for Class (B) offices is approximately 21.4%, and in Riyadh and Jeddah, there are older office buildings on commercial streets (such as Old King Fahd Road and Tahlia Street) that suffer from outdated facilities and an inability to compete with modern towers like the King Abdullah Financial District (KAFD). These buildings are prime candidates for conversion.
The Architectural Paradox: What Makes an Office Bad Makes It an Excellent Residence!
Some might think that converting an office into an apartment is simply a matter of building a few interior walls. The truth is that the architectural challenge is the biggest obstacle, but it presents a surprising paradox.
The global architecture firm Gensler evaluated more than 1,300 office buildings in North America to determine their suitability for conversion. The result? Only 25% of the buildings are suitable for conversion.
But the most important finding was that the "flaws“ that make an office building undesirable today are the very same ones that make it an ideal residential project.
The report states: ”The floor-to-ceiling height in older Class C buildings is typically 12 feet. This height is considered very low and cramped for a modern office (after installing central air conditioning and drop ceilings, only 8 feet remain). But once these systems are removed, you get a residential apartment with an 11-foot ceiling height—which is considered extremely luxurious in the residential world!“
The Five Major Engineering Challenges:
1- Floor Plate Depth: Offices are designed to be very deep, whereas apartments need windows and natural light in every room. Buildings that are too deep leave dark spaces in the middle that are unsuitable for residential use.
2- Plumbing: Offices have central restrooms grouped in a single area. Converting them to residential units means plumbing must be extended to each apartment (bathroom and kitchen), which requires extensive drilling into concrete floors.
3- Windows: Office windows often do not open, and their design does not provide the privacy required for residential use.
4- Amenities: Modern residential buildings require gyms, swimming pools, and common areas, which are not available in older office buildings.
5- Structural framework: The grid of columns in offices may conflict with the optimal layout of apartments.
The best buildings for conversion are those built before the mid-1990s, when floor areas were smaller, windows could be opened, and ceilings were lower.
Economic Feasibility: Is it worth the effort?
The engineering challenge can be solved with money, but do the numbers make sense?
The cost of converting an office building to residential use ranges globally from $80 to $220 per square foot (equivalent to 3,200 to 8,900 riyals per square meter), depending on the building’s condition and the extent of structural modifications required.
Despite this high cost, the conversion saves about 30% of the cost of building from scratch and saves a lot of time (18–24 months for conversion versus 30 months for new construction).
More important than the construction cost is the "return on valuation.“ Reports from Platinum Capital indicate that distressed office buildings that are successfully converted in prime locations experience a valuation jump ranging from 30% to 60% compared to their value as offices.
The Role of Legislation: The Magic Solution in London
If the economic viability exists, why don’t we see more of these projects? The answer lies in "legislation.“
A recent Brookings Institution study covering 18 buildings in six U.S. cities reached a startling conclusion: in five out of six markets, no conversion project is economically viable without government intervention or support.
In contrast, London has succeeded in creating a boom in conversions thanks to a smart piece of legislation known as Permitted Development Rights (PDR). This legislation allows property owners to change a building’s use from commercial to residential without having to go through complex and lengthy planning procedures, thereby reducing risks and accelerating the pace of investment.
In Saudi Arabia, changing a property’s use from commercial/office to residential requires approvals from municipal authorities, local governments, and civil defense agencies, as well as the application of the Saudi residential building code to a building originally designed as an office. These regulatory complexities lead developers to prefer demolishing the building and rebuilding it, or leaving it vacant, rather than navigating the maze of conversion procedures.
Global Experiences: From New York to Calgary
One cannot discuss conversion without reviewing successful experiences around the world.
In New York, there are currently 44 office conversion projects underway or in the planning stages, totaling 15.2 million square feet, which will produce more than 20,000 residential units (3). The most notable of these is the conversion of Pfizer’s former headquarters on 42nd Street into 1,600 apartments, and the 25 Water Street project, which will provide 1,300 units.
In London, the PDR system has produced more than 121,000 apartments from converted offices since 2013. In 2024 alone, 3,272 new conversion applications were submitted.(2
In Calgary (Canada), the local government introduced a direct financial incentive program worth $75 per square foot for every developer who converts an office building into housing. The result: 15 projects and an increase of 24% in downtown residential units.
The Saudi Opportunity: Foreign Capital and Secondary Markets
On January 22, 2026, Saudi Arabia took a historic step by opening 170 areas to non-resident foreign investors. Knight Frank estimates that $6.3 billion in global capital is waiting to enter the Saudi market.
This "smart capital“ is not looking to buy old, low-yield Class C office buildings. It is looking for ”repositioning“ opportunities.
Older office buildings on secondary commercial streets in Riyadh and Jeddah, which have lost their luster to major developments, represent a golden opportunity. Converting these buildings into modern lofts or serviced hotel apartments will provide a unique real estate product that meets the demand of young people and expatriates who prefer to live in the heart of the city, where services are abundant.
Furthermore, this conversion is an environmentally friendly option, as it preserves the ”embodied carbon" in the existing concrete structure rather than demolishing and rebuilding it, which aligns with the sustainability goals of Vision 2030.
Conclusion: When Should We Start the Conversation?
Converting offices into housing is not a magic solution for every vacant building. The engineering challenges are real, and the costs are high. However, it is a strategic tool that has proven successful globally in revitalizing dormant assets and providing housing in city centers.
To see this solution become a reality in the Saudi market, we need two steps:
1- Regulatory flexibility: Legislation similar to the UK’s PDR, which facilitates change of use and offers exemptions or incentives to developers who revitalize old buildings.
2- Investment boldness: Real estate developers willing to think outside the box and use technology (such as valuation algorithms) to identify buildings suitable for conversion.
