Phoenix ranks 13th for office-to-apartment conversions as 1,550 units take shape
Phoenix ranks No. 13 among the nation’s largest pipeline of office-to-apartment conversions.
RentCafe tracked 1,550 units being converted in the metro, according to its newest report released March 24.
At the beginning of 2026, 90,300 apartments were in the process of conversion nationwide, up 28% from 70,600 a year earlier, according to the report. Office conversions now account for 47% of all future adaptive reuse projects nationwide, the report said.
Financial pressure and government-backed incentives also are accelerating conversions.
With about one-third of U.S. office loans set to mature by 2027, many owners face mounting pressure to act on underperforming properties, according to the RentCafe report.
One office-to-apartment conversion project getting substantial attention over the years is One Camelback, at the southeast corner of Central Avenue and Camelback Road in uptown Phoenix. The lender had foreclosed on the property while it was in the process of being converted to apartments.
Then on Dec. 4, Mesa-based Kinella Capital LLC bought the 11-story tower for $36 million, according to Tempe-based real estate database Vizzda LLC.
The property was 80% completed when Kinella bought it, said TK Stratton, founder and CEO of Kinella Capital.
He expects to begin leasing by the fourth quarter of this year.
Before embarking on this office-to-apartment conversion project, Kinella had purchased townhome units that originally were part of the Hilton Phoenix Resort at the Peak, paying $11.3 million to Fortress Investment Group in November 2024, according to Vizzda.
A month before that, Fortress had sold the resort and hotel for $39.5 million to Phoenix-based Pivotal Group.
Since then, Kinella renovated the townhome portion of the property into apartment units.
Called Views at The Peak, the 78-unit property is about 97% occupied, Stratton said. Monthly rental rates range from $1,900 to $2,400.
Meanwhile, a group of partners is quietly gobbling up office space surrounding the former Metrocenter Mall redevelopment project, investing $400 million to convert existing space into 1,786 apartment units.
As part of that investment, Foundation 8 LLC plans to create 715 rental units at Canyon Corporate Center, where a garage is being turned into 94 units and two office buildings will be converted to 271 units. Another 350 homes are planned on nearby vacant land in the future.
That office complex is behind The Sheraton Crescent, where the group will invest $120 million to convert the shuttered hotel into 258 apartment units.
One Camelback ‘a perfect fit for a conversion’
Converting a hotel or townhomes to rental units can be a lot easier than converting office space.
Some office or retail space is not conducive to apartments, especially those with bigger floorplans, Stratton said.
“If you look at an empty Home Depot, that’s a lot of square footage,” Stratton said. “Think of all the apartments you could put inside a Home Depot. But there are only so many you can put around the perimeter that have windows. What do you do with the middle?”
Stratton said that wasn’t an issue for One Camelback, which has an atrium in the middle of the building.
“One Camelback is a perfect fit for a conversion,” he said.
But it can be very expensive to convert, which means it’s difficult to create an affordable product. To cover costs, a developer would need to rent the units at market rate, he said.
“How do you make a payment to the bank if the rents can’t be big enough to pay for all this cost that had to happen,” he said. “That’s the challenge with converting office.”
Of the 163 apartments at One Camelback, 150 were already completed, he said.
“When we bought this thing they were getting close to finishing,” Stratton said. “We only have to complete 13 or 14 units.”
Keith Mishkin, president and broker of Scottsdale-based Cambridge Properties, had purchased an aging hotel at 3101 N. 32nd St. with plans to convert it to apartments.
The property originally was built in 1969 as an apartment building by Robert Woolley, who converted it to a hotel called Granada Royale, Mishkin said. Woolley built several of these all-suites hotels that later became Embassy Suites.
The property had downgraded to a Travelodge by the time Mishkin bought it in 2016.
“Another group purchased from us and did a beautiful execution on that plan as it remains a successful 76-unit apartment community today,” he said.
David Newcombe, a Phoenix real estate agent and co-lead for Brits of Compass, said the majority of concrete and steel commercial structures have very few supporting walls, making it easy to convert office space into apartments.
A downside, however, is that you’re stuck with the existing structure, which may or may not have balconies or elevators.
“You have to live with imperfections or spend a lot of money fixing them,” Newcombe said. “For example, elevators are a major issue to redo because they cost a lot of money to change, but the last thing you want is for them to break down on you.”
A big driver of these conversions is a post-pandemic increase in the availability of underperforming B and C class office assets on the market, said Jesper Dalskov, residential market leader at Edmonton, Canada-based Stantec.
“This is leading to bargain pricing and deal opportunities for opportunistic developers,” Dalskov said. “In many cases, the economics make sense and the demand for housing is immense.”
He sees the hot trend cooling in the future.
“Long term, the abundance of underperforming office space will naturally diminish, and this market trend will normalize,” Dalskov said. “But I believe there will always be opportunities for conversion with the right types of buildings at the right time.”
