Office Conversions

City centers are struggling to fill the gap left by commuters who now come into the office a few days a week, if at all. These workers were patrons of downtown businesses, from restaurants to dry cleaners. Without them, offices are desolate and businesses are shuttering. To save these downtowns, cities are trying to turn unused office space into housing. San Francisco officials are making efforts to adjust current building codes and get rid of extra fees for office-to-residential projects. In Washington, D.C., the mayor wants to put more money into a tax relief program for office conversions. Even cities like New York, where many companies have offices, vacancy is becoming a problem. Office vacancy in Manhattan was 15% recently, according to real estate investment firm CBRE. “The commute has crushed a lot of people’s willingness to trudge into the office every day,” said Jason Alderman, the head of real estate giant Hines’ New York office. He said Hines’ buildings within a half-mile of the major transit hubs Grand Central and Penn Station have higher occupancy rates than others. But, he added, “buildings that are catering to people — making it exciting to come back to the office or easy to come back to the office — are winning.”

As demand for other office buildings decreases, Hines is considering office-to-apartment conversion projects. Alderman said the company is actively bidding on properties. Converting an office building into a residential space can be difficult, and that’s when the building already has the right structure to work with. A lot of buildings don’t — they’re too wide, or have the wrong kind of windows, which makes conversion more expensive. But politics may be a greater factor in a project’s success. Even as cities try to entice developers to turn office buildings into apartments, they’ve also installed obstacles. In New York, strict zoning rules already impact which buildings — and in some cases, how many floors — can be converted into housing. Rezoning a property for residential use can be timely and costly. Alderman said approval also requires support from politicians, who often add requirements for affordable housing a developer may be unable to afford.

Source: NPR