Chicago and Washington, D.C., Among Cities Well Suited for Office-to-Co-Living Conversions

Like most major American cities, Chicago and Washington, D.C., are struggling with a trio of real estate challenges: a housing shortage that has driven up rents, record rates of homelessness (in large part caused by rising rents), and increasing office vacancy rates. A new report from The Pew Charitable Trusts and Gensler, a global architecture, design, and planning firm, provides a blueprint for how each city could address all three problems at once: Convert empty office buildings to microapartments with shared kitchens, bathrooms, and living rooms.

Each conversion would produce hundreds of centrally located homes with low rents—$950 per month in Chicago and $1,000 in Washington, about half the median rent in each city. These rents would be affordable to someone earning roughly half of Chicago’s area median income and just 40% of Washington’s area median income. And because most vacant office buildings in the two cities are near public transportation and commerce, residents who don’t own cars could still get to work and stores.

Policymakers have sought to promote the conversion of vacant office buildings to housing ever since the COVID-19 pandemic—and the resulting move toward increased remote work—decimated the U.S. office real estate market. But converting a modern office building to traditional apartments is both difficult and expensive, in part because office plumbing is typically buried in the building’s central core; traditional apartments require extending the plumbing outward, to every unit. The Pew/Gensler report examined the feasibility of a new type of design, which is dormitory-style housing that’s often called “co-living” or “co-housing”: small, private units built on the perimeter of each floor that use existing windows. Each furnished room would be around 150 to 220 square feet, with a bed, closet, desk, microwave, and refrigerator. Residents would share kitchens, laundry, living areas, and bathrooms in the middle of each floor; there would be a mixture of private and office-style shared bathrooms, and shower rooms would all be private.

This report is the third from Pew and Gensler illustrating what would be required to transform vacant office space into co-living spaces. The first report, released last year, looked at Denver, Minneapolis, and Seattle. The second examined the viability of this concept in Houston and Los Angeles. All three reports have found office-to-co-living conversions to be far less expensive than the cost of converting office buildings to studio apartments. In Chicago and Washington, the per-unit cost of converting an office building to co-living units would be about half as much as the per-unit cost of developing new studio apartments. And a co-living conversion could produce three times more units than converting an office building to traditional apartments.

Gensler

Chicago and Washington: ideal cities for co-living

As expensive cities, Chicago and Washington are perfect markets for the low rents that co-living can offer. Both also have a large population of single people: In Chicago, 49% of renter households have just one person. In Washington, 56% of renter households consist of just one person.

Gensler

To encourage the development of downtown apartments, including conversions, both cities have also sought to eliminate regulatory hurdles, such as parking minimums and zoning requirements that make conversions costly and difficult. In November 2024, Chicago launched a pilot program to permit the use of mechanical ventilation in residential buildings rather than requiring operable windows. That single change could reduce the cost of conversion by 10% to 15%. This program brings Chicago’s regulations for apartment windows in line with large American cities, such as Denver, Seattle, and Los Angeles, that have sought to remove obstacles to office conversions.

With nearly 2.7 million people, Chicago is the third-most populous city in the U.S. Its office vacancy rate is a hefty 23%, but that’s an average figure; in some older buildings, more than half the office space sits empty. The city could add a large amount of centrally located housing with office-to-co-living conversions. Chicago has already seen some office-to-apartment conversions, but developers have generally created high-end units. And even those buildings have required public subsidies to help developers cover conversion costs and make the units profitable enough to attract private investment. The co-living apartments envisioned in the new Pew/Gensler report could be built for just under $200,000 each, less than half the cost of building a traditional apartment in Chicago.

In Chicago, Pew and Gensler examined the feasibility of converting a 12-story building with more than 175,000 square feet of space in the Loop, the very heart of the city. The first two floors would contain retail and office space, with on-site management, and the top 10 floors would be converted into 360 co-living units, with 36 microapartments on each level. Each floor would act as its own small community, accessible via keycard only to its residents.

In Washington, the Pew/Gensler report looked at a somewhat larger building that also has 12 stories but a larger floor plan, and a total of more than 300,000 square feet. Located in downtown Washington, it would accommodate 53 units per floor (530 in all). In this model, each floor would be split roughly in half to make a smaller community; residents would have keycard access only to their half of the floor.

The Washington design envisions apartments that are the largest of the seven cities analyzed by Pew and Gensler, averaging 217 square feet and resulting in a higher cost to build per unit than in five of the other six cities: $238,700. But smaller unit sizes such as those modeled elsewhere would also be feasible in Washington and would result in units that cost well under $200,000 apiece. In either case, the costs would be far lower than the more than $400,000 required to build a centrally located studio apartment in Washington that’s affordable to a resident with a modest income.

In the model designs for both Chicago and Washington, some units would be doubles, with two beds, to accommodate couples, friends, or a parent and child. But a large majority of units would be singles.

The economics of office-to-co-living conversions

There are three main reasons that co-living conversions cost much less per unit than conversions to regular apartments. Because plumbing is centrally located in most modern office buildings, the choice to locate bathrooms and kitchens there instead of running plumbing to each apartment produces major savings. The small unit size is a second factor; the third is using existing windows rather than replacing them. All told, construction costs per square foot for office-to-co-living conversions are 25% to 35% lower than with office-to-traditional-apartment conversions.

But even with those lower construction costs, an infusion of public money would be needed to cover part of them—because the projected cash flow from the finished projects would not be sufficient for private developers to undertake these conversions solely as a commercial venture. But U.S. cities are already subsidizing housing. And the initial subsidies for these microapartments—roughly $125,000 per unit in Washington and $80,000 per unit in Chicago—are a fraction of those required today for similarly affordable studio apartments. What’s more, the co-living models envisioned by the Pew/Gensler report would require only an initial, one-time subsidy; landlords would be able to offer low rents without ongoing operating subsides.

Appeal of co-living may go beyond finances

The concept of co-living is not new: As recently as the 1970s, large American cities such as Chicago and Washington had numerous residential hotels with low rents that catered to long-term tenants. Not coincidentally, homelessness was rare.

Now, because high housing costs help to drive homelessness, the prospect of adding hundreds and even thousands of low-cost homes to each city’s housing stock through office-to-co-living conversions could reduce homelessness in both Chicago and Washington.

And it’s not just a financial consideration for some potential tenants; a broad range of individuals might be attracted to the convenience of fully furnished homes with ample access to public transportation—people such as newcomers to the city, recent college graduates, senior citizens, and service workers. For example, in cities such as Seattle and New York—and abroad, in countries such as Germany and Singapore—the built-in community offered by co-living has proved to be popular with young people.

Attracting residents to live downtown will also help retail businesses hurt by the pandemic-caused increase of at-home work and the resulting closure of offices. As cities look to revitalize downtowns and improve housing affordability, office-to-co-living conversions offer a cost-effective way to solve several problems simultaneously.

Alex Horowitz is a project director and Tushar Kansal is a senior officer with The Pew Charitable Trusts’ housing policy initiative.