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A Bold Solution: Commercial-to-Residential Building Conversions

people turning offices into homes

According to recent statistics, working from home and remote work continue to be the norm. Roughly a third of the American workforce considers themselves remote workers. Likewise, the average number of days that Americans spend in an office has declined by over 30%. This persistent reality has meant that once-thriving urban office buildings are struggling with occupancy. In cities like New York and San Francisco, several large commercial buildings are mostly empty… yet, at the same time, the demand for residential units as well as affordable housing remains high. Given this, bold solutions turning offices into homes would be a no-brainer. But as it turns out, commercial-to-residential conversions are more challenging than they might seem.

a blurry office is an example of turning offices into homes
Turning offices into homes is a bold idea that’s gaining momentum.

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For a number of reasons, developers and construction companies are less than excited about commercial-to-residential conversions. Some relate to city requirements regarding residential units that make turning offices into homes impossible. Others simply relate to costs involved in overcoming structural differences that could make commercial buildings attractive. However, that doesn’t mean that solutions don’t exist for such projects. In many instances, cities experiencing success in this area are receiving support from various stakeholders. It is precisely these types of collaborative effort that will provide viable solutions for cities struggling with vacant commercial buildings. It is thus important commercial enterprises explore all their options before giving up on what could be a tremendous future opportunity.

Evaluating Commercial-to-Residential Viability

There is no question answers are needed to the looming commercial building crisis. When considering turning offices into homes, there’s many aspects that deserve attention. Inherently, commercial office buildings are designed much differently from residential ones. For example, most commercial buildings do not have window or sunlight access in many areas. Likewise, even if a window exists, it isn’t likely to open easily to allow outside air into the space. These features mean that redesign costs may be substantial if cubicles and offices have to be completely demolished. And in some instances, it may be impossible to make a commercial-to-residential conversion feasible. Units that are void of light and air are typically not highly attractive to residents. Unless a commercial space can be easily revamped to accommodate this preference, its long-term potential for a residence is poor.

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Other challenges also exist when it comes to commercial-to-residential conversions. Typical office building designs tend to have many features in the building’s core. This includes not only things like elevators but also stairs and water systems. Such a design is not practical when servicing multiple residential units, however. Individual residences will need to have mobility access as well as their own dedicated water, electricity, and utility services. Here again, redesign costs can be substantial when turning offices into homes for some buildings. This too may be prohibitive when examining feasibility options. Combined with zoning and permitting restrictions that govern residential units, developers may find these projects overwhelming. Without incentives and supports, it might be easier and cheaper to simply build a new residential structure from scratch.

a skyline full of vacant offices
There are a lot of vacant office buildings, and an ever-increasing need for homes.

Effective Solutions to Overcome Challenges

While barriers to commercial-to-residential conversions are formidable, they can be overcome with the right strategies. After developers assess structures, conversion costs, and zoning requirements, options may seem limited. But in many cities, bold solutions are being offered to change these perspectives. One of the most important ones occur at a city-level when municipalities look to adjust permitting and zoning requirements. Adjusting these ordinances can make a significant difference in cost and time demands when turning offices into homes. Ultimately, this can be a win-win for cities and developers alike. Affordable housing options can increase, and revitalization of downtown areas may occur. In the process, cities reap the benefits of increased tax revenues down the road. And developers receive an increasing number of interested residents for their converted properties.

Such collaborative solutions are also extending to state and federal levels as well. Several states have launched programs that incentivize developers toward commercial-to-residential conversions. Subsidies to assist with the higher costs and time investments for turning offices into homes can be offered by states. This is a particularly good strategy for states with a high number of vacant commercial buildings like New York and California. At the same time, federal supports exist to accomplish similar goals. Government programs have made available below-market-rate loans as support for developers in this regard. Understanding that conversion costs can range from $473,000 to $633,000 per unit, such financial access is important. In isolation, none of these strategies may be enough to overcome barriers. But together, their combined impact can make commercial-to-residential conversions increasingly attractive and practical.

Leveraging Business Sense with Supports

commercial-to-residential conversions in a sunny locale
Commercial-to-residential conversions are on the upswing.

While government supports at various levels are helpful, ultimately businesses will need to determine project value. Commercial-to-residential conversions that are likely to be most successful are those that also have prime locations. In many instances, commercial office spaces exist in city centers, which may be quite attractive. They also tend to be very close to urban transit centers, which is appealing to individuals as well. And office spaces can offer a number of unique amenities that may not be feasible for new, cookie-cutter complexes. For example, some of the latest ones in New York even offer a bowling alley as part of their amenities package. Developers must therefore explore these additional features when determining whether turning offices into homes is worthwhile.

The bottom line is that all commercial-to-residential conversions are unique. None offer a standardized approach to turning offices into homes. As noted, challenges routinely exist, but these barriers don’t mean that opportunities are lacking. Through stakeholder collaborations and supports, these projects can have notable potential especially when evaluating long-term gains. As urban centers revitalize and change in character, old commercial buildings can evolve to be new centers of activity. Indeed, out-of-the-box ideas may be needed to realize this potential–but the potential certainly exists regardless.


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