PGIM's Marcus: Seeing More Office-to-Housing Conversion

Editor's take

The AI boom's voracious appetite for data centers is creating significant construction bottlenecks, exacerbating an already severe US housing shortage and prompting some conversions of underutilized office spaces into residences.

This dynamic is a direct consequence of escalating AI infrastructure demand, which competes for construction resources and labor with the urgent need for more housing units. The resulting strain on development capacity impacts urban planning, real estate investment strategies for firms like PGIM, and ultimately, the availability and affordability of both commercial and residential properties.

Future analysis should focus on the scale of office-to-housing conversions versus new residential construction, the specific types of office buildings proving most viable for conversion, and whether this trend can meaningfully alleviate housing supply pressures or solely address data center capacity needs.