A record number of buildings converted into apartments as the pandemic empties offices

According to recent reports, the practice of turning office buildings into apartments is the highest ever in the United States. According to RentCafe’s analysis, 41% of the approximately 32,000 apartments created by adaptive use since the beginning of 2010 are in refurbished office buildings.

“Existing buildings already have a lot of embodied energy and are used to create them. As long as you can rent a new building, it’s very sustainable,” said the architect. Yes, the principal of Solomon Code Welbuenz. “Therefore, the conversion to housing can really extend the life of the building.”

Inflection point

It remains to be seen if pandemics and increased teleworkers will accelerate the rate of office-to-apartment conversion.

According to the National Association of Realtors (NAR), certain real estate markets such as multi-family, industrial and retail have seen a strong recovery, but office and hotel real estate markets have not recovered very quickly.

Real estate organizations say COVID-19 continues to be a concern, with the rise of the Delta variant delaying workers’ return to the office and at the same time providing a basis for business trips and entertainment. In addition, office rents are declining.

“We are at a potential inflection point,” says Forgan, who is working on a similar project in Hawaii, converting a high-rise office building in San Francisco into an apartment. “In general, employers haven’t made any radical changes to the amount of space they need … but it can come when workers return to the office. Some people return to the office. You may not want to, which generally leads to lower demand for office space. ”

“Exceptions, not rules”

Remodeling old buildings is a sustainable way to add new homes, especially since most infrastructure, including roads and public transport, is often already in place.

Built in the 1920s, Chicago’s Tribune Tower, which once housed media entities, was redeveloped into a luxury condominium in 2019. (Photo SCB architecture)

You can also simplify the approval process by converting rather than building from scratch.

“It may be faster or easier to approve a conversion project, especially in a market where it’s very difficult to qualify a new project, like California,” says Forgan. “The building is not necessarily a slam dunk, as there are other things that can hinder conversion.”

Forgan says these obstacles are the reason why office-to-apartment projects tend to be exceptions rather than rules.

“Zoning and authorization are probably two of the biggest costs,” said Doug Ressler, Business Intelligence Manager at Yardi-Matrix, who provided some of the data from the RentCafe report. “Zoning and permits vary from region to region in the country. Most have started with local ordinances and have been built up. So how do you get over it? In some regions, gatherings in specific locations. Because housing is not allowed. They are only single-family homes. ”

And there is a floor plate to consider (the distance from the elevator to the façade with windows). If the bottom plate is too large, it will be difficult to design an apartment with plenty of natural light.

“Usually, building systems are also at the end of their life, and all mechanical, electrical, and plumbing systems need to be replaced,” Forgan said, adding that the entire office building rarely has tenants. .. “If you have multiple tenants in a building, it’s difficult to get a large block of space that can be converted without moving or leaving the building.”

Historical office buildings are often good candidates for refurbishment due to their small floorboards, he says.

The apartment in The Wray, Washington, DC, housed the US State Department office. (Photo Insight Property Group)

The apartment in The Wray, Washington, DC, housed the US State Department office. (Photo Insight Property Group)

A NAR survey of commercial members found that 84% of respondents were using the same amount of office space as before the pandemic, while 11% reported a reduction in office space.

“People are really reassessing whether workers will return to these office spaces, and potentially because of the large amount of office space that could be available for conversion,” Forgan said. say. “I think the office market hasn’t really responded to it yet because it’s really unknown.”

Retail conversion

According to NAR reports, retail space centered on shopping malls continues to recover. However, large department stores that have lost online shopping may have acquired a new life lease by facilitating the delivery of Internet purchases.

“Some of them can be converted back into e-commerce wear housings for industrial purposes,” says Ressler. “Or, the main purpose of the fulfillment center is to fill the void with Amazon, Google. How close are you to the people who use my product?”

According to NAR, a nearby retail center known as a strip mall is also bouncing back. Part of that recovery may be due to strip mall owners exploring new options when it comes to tenants.

“Currently, retail strip centers are being restructured very quickly, especially for clinics and emergency medical care,” says Ressler. “If a large (hospital) provider says” cut costs … “, create this emergency medical center with vacant offices in this strip mall. It is possible. I can reuse it. “

A record number of buildings converted into apartments as the pandemic empties offices

Source link A record number of buildings converted into apartments as the pandemic empties offices

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