How Empty Offices Become Apartments In The U.S.

Summary

The US faces a record high of 94 million square feet of vacant office space in Manhattan, prompting discussions on converting offices to residential units. While the idea seems promising, not all buildings are suitable for conversion due to legal, structural, and financial challenges. Cities like Washington D.C. and Philadelphia are leading the trend, offering incentives to developers. However, the converted apartments tend to be expensive, and the scale of conversion is not yet sufficient to significantly impact the housing market. The success of such projects depends on zoning laws, government policies, and market demand.

Takeaways

• 🏢 Manhattan currently has a record high of 94 million square feet of empty office space.
• 💼 Large investors face potential defaults in their office real estate portfolios due to the vacancies.
• 🏠 There's a significant challenge in finding affordable housing, prompting discussions about repurposing office spaces.
• 🔄 Converting office buildings to residential units is not straightforward due to various constraints and regulations.
• 📈 Only a small percentage of office buildings are suitable for conversion, with factors like age and layout playing crucial roles.
• 🏗️ Cities with older office buildings, like Washington D.C. and Philadelphia, are leading the conversion trend.
• 💡 'Remassing' is a technique used in conversions to improve the layout and functionality of the building for residential use.
• 💸 Converted apartments tend to be more expensive, which may not address the need for affordable housing.
• 🏙️ Zoning laws and regulations are a significant barrier to converting offices to residential spaces in many cities.
• 🏛️ Incentives like tax abatements can encourage developers to undertake office-to-residential conversions.
• 🌐 The scale of the housing shortage in the U.S. far exceeds the potential supply from office conversions alone.

Q & A

What is the current record for empty office space in Manhattan?

The current record for empty office space in Manhattan is 94,000,000 square feet.

Which major investors are facing defaults in their office portfolios?

Major investors like Blackstone and Brookfield are facing defaults in their office portfolios.

What opportunity do mayors see in the current real estate situation?

Mayors see an opportunity to change the mix of uses in downtown areas by converting unused office space into housing.

What is the percentage of New York stock that is convertible into residential units according to the script?

About 3% of the New York stock is seen as being convertible into residential units.

Why is converting every office building into apartments not as simple as it sounds?

Converting every office building into apartments is not simple because not every building is suitable for conversion, and some cities have laws making conversions difficult.

What are some of the challenges developers face when converting office buildings into apartments?

Challenges include ensuring access to light and air, dealing with plumbing and bathroom placement, and the high cost of conversion.

How does the technique of 'remassing' play a role in office-to-apartment conversions?

Remassing involves modifying the physical layout of a building to make it more suitable for residential use, such as creating additional windows or altering the shape of the building.

What is the typical rent for a single bedroom at the converted Poplar Building in Philadelphia?

The typical rent for a single bedroom at the Poplar Building in Philadelphia is $2,000 a month.

How does the zoning law in New York City affect the conversion of office buildings into residential units?

New York City's zoning laws currently make it difficult to convert office buildings into residential units, as commercial buildings are generally allowed to take up more space than residential ones.

What is the role of government policies in facilitating or hindering office-to-apartment conversions?

Government policies, such as zoning laws and tax incentives, can either facilitate or hinder office-to-apartment conversions by affecting the financial feasibility and regulatory requirements of such projects.

What is the estimated number of additional market-rate homes needed in the U.S. for low-income renters?

The U.S. needs about 7 million more market-rate homes at affordable price points for extremely low-income renters.