Office‑To‑Residential Conversions: An Investor’s Downtown Play

Staring at a half-empty tower and wondering if it could become apartments? You’re not alone. Downtown Dallas has rising office vacancy and steady renter demand, which is why conversions are getting real traction. In this guide, you’ll see the market signals, incentives, building traits, costs, and a practical playbook to vet an office-to-residential deal in the Downtown Historic District and nearby blocks. Let’s dive in.

Downtown Dallas: market signals you can bank on

Downtown office vacancy is elevated, and older towers are feeling it. Recent research shows DFW office vacancy above 20%, with downtown assets often higher, which is pushing owners to repurpose space into homes and retail activation according to Colliers.

On the demand side, downtown rents trend higher than many suburban areas. Average apartments downtown have been in the low-to-mid $2,000s per month, supported by walkability and transit, per RentCafe’s Downtown Dallas data.

You also have local proof of concept. Partial conversions like Santander Tower and Bryan Tower show how developers are removing surplus office floors and adding hundreds of units, as reported by The Dallas Morning News.

Incentives that change the math

Dallas offers several levers that can turn a marginal deal into a viable one:

• Historic tax credits: Eligible projects can stack the 20% Federal Rehabilitation Tax Credit and the Texas 25% Historic Preservation Tax Credit. Both require certified historic status and adherence to the Secretary of the Interior’s Standards. Start with the program pages for the federal credit and the Texas credit.
• TIF support: The City’s Downtown Connection TIF can participate in public improvements and strategies that add residential population downtown. Review the district overview from the Office of Economic Development for scope and eligibility at the Downtown Connection TIF page.
• Parking reform: One of the biggest barriers just got lighter. In May 2025, Dallas adopted a parking code amendment that removed minimums downtown and around rail, and reduced multifamily ratios. Fewer or no new stalls can save millions. See the City’s summary of the parking code amendment.

Building traits that convert well

Not every tower is a fit. A quick architectural and engineering screen can save months.

Floor plates and light

Smaller floor plates with perimeter windows make unit planning easier. Deep center-core plates limit daylight reach and push you toward costly façade changes. Industry analyses suggest only a subset of office buildings score well for conversion potential, as discussed by Gensler.

Structure and systems

Residential needs distributed plumbing stacks and individualized HVAC. Concrete slabs that accept penetrations, adequate riser locations, and replaceable MEP systems all reduce surprises. Exterior window rhythm also affects unit depth and bedroom layouts.

Egress and vertical circulation

Stairs, elevator count, and corridor geometry drive unit yield and code compliance. Many towers land on partial conversions, placing apartments on upper floors where views add value and lower levels stay office or retail.

Costs, revenue, and financing realities

Cost ranges and drivers

Conversion costs vary widely by scope and building condition. Industry research cites ranges from roughly the low $100s per square foot to $600+ per square foot in major markets, driven by MEP replacement, façade work, hazardous materials, and interest carry. See CBRE’s analysis on conversion dynamics in its investigation of office-to-multifamily conversions.

Revenue assumptions

Underwrite rents using current downtown comps and unit mixes. Downtown trends show average rents in the low-to-mid $2,000s, per RentCafe. Model concessions, absorption, and loss-to-lease with conservative assumptions.

Capital stack and lender appetite

Expect construction or bridge debt with strong sponsor experience. Many Dallas deals layer in historic credit monetization and, when available, TIF support to right-size equity and reduce risk. Lenders look for conservative pro formas, experienced teams, and clear paths to a new Certificate of Occupancy.

Deal playbook: due diligence checklist

Use this quick-hit sequence to pressure test a candidate building:

• Market and rents: Confirm unit-by-unit achievable rents, concessions, and lease-up pace using downtown data and near-term supply.
• Historic eligibility: Check National Register or local landmark status for credit eligibility, then align scope with Standards early.
• Zoning and parking: Verify current zoning and confirm whether the parcel benefits from no-minimum parking under the City’s parking amendment.
• Technical screen: Review floor plates, window spacing, structural grid, risers, and façade condition; run a quick-fit test plan and elevator/egress checks.
• Costing: Obtain ROM pricing for MEP, façade, and unit interiors; include abatement and contingencies.
• Incentives: Map eligibility and timing for the federal and Texas historic credits, plus Downtown Connection TIF participation if applicable.
• Entitlements: Outline the change-of-use and Certificate of Occupancy path with the City of Dallas. Start with the City’s CO guidance.

Risks and how to mitigate

• Construction and cost escalation: Front-load hazardous materials surveys and MEP scope validation. Use contingencies and early GC pricing.
• Entitlement and historic review timelines: Engage City planning and, if pursuing credits, state and federal reviewers at concept stage.
• Financing and rate risk: Model cases with and without incentives. Sequence financing to monetize credits and limit leverage.
• Market absorption: Underwrite conservatively and plan for phased delivery where floor plates allow.

Case patterns in Dallas

Dallas projects often favor partial conversions to capture view premiums and maintain ground-floor activation. Local examples like Santander Tower and Bryan Tower show phased delivery, mixed-use stacks, and the use of incentives to balance the pro forma, as covered by The Dallas Morning News.

The bottom line

Downtown Dallas offers a rare mix: surplus office space, strong urban renter demand, and policy tailwinds that reduce parking burdens and reward preservation. When you pair the right floor plate with the right incentive stack, a conversion can pencil and help rebalance the district.

If you’re mapping an adaptive reuse strategy or weighing a tower acquisition, let’s talk about how to position your move with clear data, smart sequencing, and polished execution. Connect with Nicole Brende to align your investment goals with an actionable plan.

FAQs

Are office-to-residential conversions financially viable in Downtown Dallas right now?

• They can be when a building’s floor plate, daylight access, and systems fit residential use, and when incentives plus Dallas’ parking reform reduce costs; feasibility is case-specific and depends on conservative underwriting and sponsor execution.

What incentives most impact a Downtown Dallas conversion pro forma?

• Historic tax credits are big levers for eligible buildings (20% federal and 25% Texas), and Downtown Connection TIF participation can support public-facing elements that enhance viability.

How did Dallas parking reform change conversion feasibility downtown?

• The City removed parking minimums downtown and near rail and reduced multifamily ratios, which can eliminate costly structured parking and improve unit yield.

What building traits should I prioritize when screening a tower?

• Favor smaller floor plates with ample perimeter windows, penetrable concrete slabs, workable riser locations, and elevator/egress layouts that support efficient corridors and units.

How long does the change-of-use and Certificate of Occupancy process usually take in Dallas?

• Timelines vary by complexity; simple changes are faster, while conversions that require historic review and major upgrades can take months to a year or more, so start coordination early with City reviewers.