As hybrid work continues to dominate the work culture in the United States, office vacancies prevail in major cities such as New York, Los Angeles, and Chicago. In late 2023, United States reached over 18% office vacancies average nationwide, with not much indication that this figure will decrease anytime soon. Meanwhile, the housing crisis also plagues the economy, with skyrocketing prices in high demand with limited supply. Converting offices into housing has therefore become a hot topic, as it would essentially kill two birds with one stone.
Three Obstacles
There is a widespread misperception that turning an office into housing just requires modest interior renovations—a few walls, some sinks, and some toilets—to make the apartments habitable. The difficulties that developers and landowners encounter are far more difficult.
The first major obstacle is zoning. Zoning laws regulate how land in a certain location can be used, such as commercial, residential, office, and industrial. Zoning establishes development patterns and separates certain land uses like industrial factories away from residential communities. It can also protect the identity of neighborhoods by preventing large skyscrapers in low-rise residential areas. In the US, offices are typically located in land-zoning areas that only allow office or commercial development. Changing land use to housing requires a zoning change, which is complex and time-consuming. Landowners and developers should also consider if the neighborhood around their office building is viable for living. While office buildings downtown with access to transportation and city amenities are desirable for future tenants, an office building with no access to public transit, grocery stores, or schools is not ideal. The location of the new residential units should also provide enough of an incentive for people to desire to live there. Without a doubt, adding housing in a commercial area will enhance the vibrancy of an office district by increasing human activity after business hours.
Building codes are the second significant obstacle, as US residential code regulations are significantly different from non-residential ones. One must thoroughly review building codes to assess the potential costs needed in the conversion process. Depending on the building’s existing conditions and the timing of the most recent building permit approvals, a change of occupancy to residential can spark any number of required upgrades such as seismic reinforcement due to new earthquake regulations, facade or HVAC system upgrades to meet energy codes, or adding operable windows for residential units. Building codes differ greatly from one state to another, so one needs to assess the building codes active in your jurisdiction. For instance, most jurisdictions in New York City have a cutoff date of 1961, after which office buildings constructed thereafter are prohibited from fully converting to residential use. Some southern states have additional provisions for residential facade glazing design to protect against hurricanes.
Lastly, the third challenge is the problem of floor plate depth. Also known as leasing depth, it is the distance of leasable space from the exterior of the building to the core with shared elements such as an elevator and elevator lobby. While older office buildings were constructed with floor plate sizes similar to residential towers, more recent office tower floor plates from the 1950s onwards are much larger. Before the event of central heating and cooling systems, earlier buildings were designed to maximize window access and airflow. Innovations in reinforced concrete and steel also allowed greater spans from a tower’s structural core to the facade of the building. Large floor plates for offices are desirable, as they increase the flexibility of use of office tenant space, which in turn developers and real-estate owners can sell at higher rental rates. A larger floorplate is more “efficient,” meaning the ratio of leasable office space compared to service amenities (i.e. elevator core, stairs, mechanical shaft) is high, therefore owners can lease at a higher profit. With all this deep floor plate, combined with a legal requirement in many cities that require bedrooms to have access to operable windows, it makes the conversion from office to residential very challenging. While office work may only require fluorescent lighting, livable units desire natural lighting and fresh air.
As every building is different and faces these three obstacles at varying levels, the solution for each project can vary. With all of the associated costs with zoning, building codes, and large floor plates, conversions are not cheap. Therefore, these conversions are not a solution to the affordable housing crisis. However, multifamily housing seems to be the most common reuse of office conversion and offers one solution to many in the search to solve the US housing crisis.
Reaping the Benefits
Despite all the aforesaid challenges, there are huge benefits when these obstacles are overcome. Not only does office-to-housing conversion resolve office vacancies and the housing crisis, but it is also significantly better for the environment. Given the floorplate problem stated earlier, older office buildings built before 1950 are better candidates to convert to housing. Coincidentally, these older office buildings are some of the city’s worst energy-performing buildings, with outdated mechanical systems, and windows with little to no thermal protection. Any retrofits in New York City would require compliance with Local Law 97m which requires carbon emission improvements such as building electrification. Other cities are also updating their energy codes with climate change in mind.
Compared to building a whole new residential tower from scratch, office-to-residential conversion is less prone to public dissonance as the buildings in question already exist. It is also generally less expensive than to build and has a smaller environmental impact. For historically prominent office buildings, conversion allows owners to retain the unique design features of the original building. Some building upgrades can commence while tenants are still within the building.
Partial conversion of office to housing could have the benefit of providing live-work environments, where work and living happen in the same development. The United States could learn more from other countries like Europe and Asia, where mixed-use programs have much potential to stimulate each other, in a symbiotic-like environment.
What are some ways to make office conversion easier and more efficient? Well, for starters, local governments could offer financial incentives to transform vacant offices. Zoning regulators could also expedite the permit and zooming process, and become a resource for architects and developers to be a “one-stop shop” and answer questions and provide advice through the process. Given the current trends in our working environment, it is certain that offices will not go back to full capacity anytime soon – whether it be residential or otherwise.
References:
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“Floor Plate in Commercial Real Estate | Commercial Real Estate Loans.” www.commercialrealestate.loans, Janover Commercial Real Estate Loans, 20 Feb. 2023, www.commercialrealestate.loans/commercial-real-estate-glossary/floor-plate/. Accessed 13 Apr. 2024.
Lasser New York Real Estate. (2023). Office to Residential Building Conversions: Interview with Collaborative Construction Management (E12). [Podcast]. Transmitted 9 May 2023. Available at: https://lasserlg.com/office-to-residential-building-conversions-interview-with-collaborative-construction-management/. Accessed 13 Apr. 2024.
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“Opinion | Just Look at Why It’s so Hard to Turn Offices into Homes.” Washington Post, 27 Sept. 2023, www.washingtonpost.com/opinions/interactive/2023/city-downtown-conversion-office-building/.
Overstreet, Kaley. “Zoning Laws and Their Impact on Urban Planning in the United States.” ArchDaily, 10 Jan. 2023, www.archdaily.com/994782/zoning-laws-and-their-impact-on-urban-planning-in-the-united-states.
Paynter, Steven. “What We’ve Learned by Assessing More than 1,000 Potential Office-To-Residential Conversions.” Gensler, 23 Oct. 2023, www.gensler.com/blog/what-we-learned-assessing-office-to-residential-conversions. Accessed 13 Apr. 2024.
