Summary of Key Points
Recently, the supply logic for affordable rental housing has changed—no longer relying solely on new construction, but increasingly converting idle office buildings and factories into rental properties (referred to in the industry as “non-residential to rental” conversions). This approach is cost-effective and fast-paced, addressing both the issue of vacant commercial and industrial premises and filling the gap in affordable rental housing supply. Tenants are also very satisfied with these options, with occupancy rates generally exceeding 90%. Although policies have been easing to support this trend, finding suitable properties for conversion and managing their subsequent operations remain challenges.
Detailed Explanation
What is “non-residential to rental” conversion?
Simply put, it involves transforming buildings that were originally used for office or industrial purposes into affordable rental housing units. For example, the Chuangzhi Cloud City in Nanshan District, Shenzhen, was previously an office building but has been converted into 744 rental units for professionals, equipped with shared kitchens and gyms. Eighty percent of these units are small, ranging from 43 to 60 square meters, and the occupancy rate is 95%. In Minhang, Shanghai, three vacant office buildings have been converted into 1,080 rental units, with an occupancy rate of 94%, and this project even issued the country’s first “commercial-to-rental” investment product, attracting more capital to participate. An old building on Jiangda Road in Wuhan is also being renovated to become a youth apartment complex.
Why has “non-residential to rental” conversion suddenly become popular?
The popularity stems from strong demand on both sides of the supply-demand equation:
- On the supply side (owners): Many commercial and industrial buildings are vacant, resulting in no rental income for the owners, which is a significant financial pressure. Converting them into rental housing provides a way to revitalize these assets. For instance, one project in Shanghai generates an annual income of over 50 million yuan, which is much better than leaving them unused.
- On the demand side (tenants): There is a shortage of affordable rental housing in core cities, especially small units suitable for new residents and young people, as well as properties close to subway stations. Tenants in Shanghai say they need to make decisions within 20 days after viewing a property; parents accompanying their children to school are looking for schoolside housing, and those who do not want to take on mortgage payments are using rental income to improve their living conditions—these needs are stable.
Data supports this trend: In the first half of 2026, converted rental projects accounted for 33% of new developments, a 7-percentage-point increase from the previous year, indicating a clear shift in market direction.
What support has the policy provided?
At the national level, there has been continuous encouragement: in 2016, commercial properties were allowed to be converted into rental housing; in 2021, non-residential buildings were explicitly supported for conversion; and in 2026, urban renewal plans emphasized the need to revitalize idle factories and office buildings. Local governments have also followed suit, with Beijing, Shanghai, Shenzhen, Wuhan, and other cities issuing detailed guidelines. For example, Shanghai issued a policy in 2025 supporting the conversion of commercial buildings into rental housing, attracting investors like AMC (Asset Management Companies). The relaxation of policies has been a key factor in accelerating this trend.
Is converting buildings easy?
Although it seems straightforward, there are practical challenges:
- Finding suitable properties: Three conditions must be met: clear property rights (with an independent property certificate), a good location (near tenants, such as near subway stations or industrial areas), and a suitable structure (the building should not be too large to avoid issues with light penetration). Office buildings below the second category are preferred for conversion.
- Effective operation: Converting buildings is just the beginning; proper management is essential. For example, young tenants often require smart locks, shared spaces, and community activities, so operators need to adapt their strategies (e.g., offering more small units during graduation seasons) to ensure profitability. Experts from Cushman & Wakefield suggest that operations must “bridge the gap between product offerings and tenant expectations” for long-term success.
What are the benefits of this trend?
It is a win-win situation for all parties:
- For the government: It increases the supply of affordable rental housing, addresses housing needs for new residents, and revitalizes idle assets, preventing waste.
- For owners: Vacant buildings generate no income; converting them into rental properties provides stable rental revenue and improves cash flow.
- For tenants: They can rent affordable and quality housing (e.g., the rental apartments in Shenzhen are cheaper than nearby options).
- For cities: It promotes the revaluation of existing assets, creating a positive cycle of revitalization, income generation, and further renewal.
In the long run, this is not just about solving housing issues but also about transforming how cities develop—moving from building new properties to making better use of existing ones.
Conclusion
“Non-residential to rental” conversion is a mutually beneficial initiative that benefits all stakeholders. Although there are challenges in finding suitable properties and managing operations, with policy support and market demand, this trend will continue to grow. For ordinary people, this means more rental options, especially in core cities, where they can find affordable rental housing with good value for money.