The Office Conversions are Good For Cities

Culture

It would make cities more attractive if office buildings could be converted into housing units.

For two years, government lockdowns over Covid-19 kept office workers home. It seems that there’s a rush to get workers back. This has created the potential for an office-space shortage and made it harder to turn those spaces into housing.

Most firms have reopened their offices in some capacity, but only 4 percent of employers surveyed are requiring employees to come back to the office full-time. In Q1 2022, office vacancies still sit at over 12 percent. In April in Midtown Manhattan, 19 percent of offices were vacant. The 5.6% vacancy rate for housing rentals is a national average, indicating America’s notoriously low home supply.

There have been many calls for vacant land to be converted to housing. Interest in vacant land has increased since the introduction of Covid. In the Washington, D.C. market, for instance, six conversions advanced between 2019 and 2021. Hickok Cole architect Laurence Caudle observed that, if there were only one study per year in Washington, D.C., six conversions would have been possible between 54 and .

But conversion is not an easy task. David Gill, a Northern Virginia land-use lawyer said that everyone talks a good game. It is difficult to understand the details.

The challenges we face can be divided into three groups: engineering, regulatory, and economic.

The first problem is that office space may still prove to be very lucrative depending on the type of business.

Class A office space remains in high demand and gets a per-square-foot rental premium. Large corporations often use Class A offices, which are located in urban centers. Class B and C buildings are older and not as centrally located.

An analysis by the D.C. Policy Center found that while a Class C office building could increase in value if converted to residential, converting it to Class A would yield even higher returns. Conversion projects may also be resisted by banks.

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However, not all Class C buildings can be converted. Strachan Forgan, an architect based in San Francisco, said that some Class C buildings are not suitable for conversion to class A.

“We’re still not gonna beat trophy-class A rents,” added Caudle, “but class B…in urban cores that are transitioning to more 24-7 urban cores, we’re seeing a lot of interest in [residential conversion].” NBC New York reported that “10 percent of Midtown’s older, less-than-prime office space could be converted to residential use, generating 14,000 new apartments.”

But conversions could become more significant in the suburbs. In 2017, 46 percent of vacant office space in Montgomery County, MD was located in suburbs. Gill claimed that pre-pandemic office demand was higher in mixed-use areas than it was in suburban spaces. One successful conversion that Gill pointed to was 5600 Columbia Pike in Northern Virginia, which reactivated a long-vacant office building by turning it into 157 residential units.

A study of office-to-residential in Paris found that the greatest potential was in far suburbs, not centralized business districts. Given the rise of walkable “lifestyle centers” in American and European suburbs, it’s plausible that office parks could become new urban neighborhoods.

Office, residential and commercial structures can be built to meet different requirements and use different materials. Sometimes they act in a way that is not intended.

“The rule of thumb in the market is an ideal office building is about 20 [thousand]-square-foot floor plates, typically six to ten stories,” Gill explains. You end up having a central core and a lot of space surrounding it. This creates long, deep spaces. To convert this space into residential you need to figure out how to split it while still giving people their windows.

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Residential structures tend to be made of concrete while office buildings are constructed from steel. The Montgomery County planning department elaborates: Many architectural elements unique to an office building, such as deep floor plates, closely spaced structural columns and dedicated core space, can create challenges for residential use.” It’s also necessary to account for sewer and electrical capacity.

These discrepancies can cause creative decision-making – and not always in a positive way. Hickok Cole was involved in a project that saw the demolition of all floors except two.

However, we spoke to architects who said that such conversions can be done if they are feasible, and that recycling old buildings will bring about environmental benefits.

“You could build 20-30 LEED new buildings, but you still are gonna have a lot more of a carbon footprint than you would be converting the same 20-30 adaptive-reuse buildings,” Gill noted.

Developers must comply with the land-use regulations. Gill said that a conversion occurred in Alexandria, VA within an “exceptional district”, where such can be done by-right. The process can be more difficult in Fairfax County.

” It takes about a year to go through a normal zoning process,” Gill stated, taking into account public inputs and the assembling of necessary documents. Entitlement costs can run up to $1 million. “That’s quite a large upfront investment for a project.”

Caudle cites mixed-use zonating as a benefit for conversions. Regulators can put arbitrary limits on the use of mixed-use zoning. In Baltimore, for instance, one neighborhood designated as “mixed-use” requires buildings to include substantial portions for either industrial or retail uses, rather than simply allowing what the market will command.

Legislation in New York State would reform design regulations for office conversions in Manhattan’s core. Current rules in Midtown Manhattan cap conversions at 250,000 square feet. Montgomery County planning authorities observe that “many successful conversions depend on some degree of regulatory relief or even financial incentives from the public sector.”

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But, it’s better to allow them by-right. Given how difficult conversions can be from an engineering perspective, city governments make the task even more complicated with their zoning requirements. Conversions are a way to kill both the urban housing crisis and the likely decline in office space. Developers are keen to convert them, as evident by the many conversions currently underway.

Concluded By Forgan: We must do something quickly to bring people back to the cores of cities if we want them to survive. We must get people downtown.”

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If this is to occur, then it must be through a return to office. It will also need to take place by making living downtown more affordable via increased housing.

This article featured additional reporting from Market Urbanism Report content staffer Ethan Finlan.

The New Urbanism series is supported by the Richard H. Driehaus Foundation. Follow New Urbs on Twitter for a feed dedicated to TAC’s coverage of cities, urbanism, and place.

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