The appeal of office-to-residential conversions lies in the ability to tap into cost savings by repurposing existing office buildings instead of constructing new developments from scratch. This financial viability is complemented by the concept of adaptive reuse, which aligns with sustainability values and waste reduction, appealing to developers and communities with a green vision of the future. Additionally, the prime location of office buildings in desirable urban areas offers convenient access to transportation, amenities, and job opportunities, making them attractive to both developers and tenants seeking a vibrant community.

According to a recent report from Cushman & Wakefield, nearly 20% of office spaces are currently empty across the United States. As the demand for office buildings has declined, one solution to these vacancies is repurposing them into housing. Within this context, we spoke with our colleagues at NELSON Worldwide to explore the goals, challenges, and overall impact of office conversions.


The Appeal of Offices: Unlocking Hidden Potential

“As real estate strategists, we meticulously explore diverse applications and aim to create spaces that cater to multiple generations. While it may seem straightforward to consider converting an office building into a residential space, the intricacies involved in formulating such a plan are far-reaching,” says Haril Pandya, Principal, National Practice Leader, Asset Strategy. “A holistic approach encompasses a commitment to sustainability by repurposing existing structures, either entirely or partially, which not only yields environmental benefits but also contributes to the overall well-being of communities.”

Office conversions appeal to developers, brokers, and tenants for several reasons, one of which is cost savings. Although office-to-residential conversion is not a new concept, what is new is the anticipated repricing of office buildings as many sit empty and depreciate in value. At the same time, residential construction costs are not going down, especially with the continued housing shortage. Therefore, transforming an existing office building into housing can be more economical compared to constructing a new building, making the project financially viable.

“Within Asset Strategy, a significant aspect of our role entails facilitating successful deals for brokers and collaborating with asset owners to unlock the true value of their portfolios,” says Allan Taylor, Principal, National Practice Leader, Asset Strategy. “Adopting this perspective is critical when considering conversion projects, as it allows us to identify and harness the hidden potential within these buildings. Our goal extends beyond community enrichment; we strive to reinvent these developments in a manner that serves both neighborhood and asset owner, ensuring a mutually beneficial outcome.”

In certain markets, there can be a high demand for housing, making conversion projects more attractive to developers and brokers. As the cost to build new residential buildings begins to exceed the cost of conversions, local governments and downtown districts across the country are altering their zoning and use regulations to make conversions easier to comply with, and this trend will only continue. Instead of constructing new buildings from scratch, converting existing office spaces into housing allows developers to meet the high demand more quickly and efficiently. This streamlined approach can save developers time and resources, making the conversion project more enticing.


Revitalizing Downtown Business Districts

Office-to-housing conversions play a critical role in revitalizing downtown central business districts, offering a multitude of benefits that contribute to their success. These conversions lead to increased foot traffic as office buildings are transformed into housing, attracting more residents to the area. With a higher population density, downtown districts experience a surge in pedestrian activity, stimulating the local economy and creating a vibrant atmosphere.

Converting an office building into housing can often result in an excessive amount of residential square footage. While this can be perceived as a benefit, it can actually be a challenge as this extra space might not translate into rentable space. To maximize return, it’s imperative to devise strategies for incorporating mixed-use elements into these conversions, such as integrating retail spaces, retaining some office areas, or introducing alternative components that offer significant community benefits.

By integrating a variety of amenities and services into one location, such as retail establishments, restaurants, and entertainment venues, these conversions foster a dynamic and inclusive urban environment. The availability of diverse offerings within walking distance further enhances the appeal of downtown areas, attracting both residents and visitors.

Preserving the historic character of downtown central business districts is another significant benefit of office-to-housing conversions. Many older office buildings possess historical significance and architectural value. By repurposing these structures into housing, developers contribute to the preservation of the area’s cultural identity. The adaptive reuse of these buildings not only breathes new life into the downtown landscape but also honors its rich heritage.

While older buildings often exude undeniable charm and curb appeal, it is important to approach each conversion with a keen awareness of the associated uncertainties. Factors such as egress, ventilation, and return on investment must be thoughtfully considered when embarking on the transformation journey. Particularly with buildings from the 70s, 80s, and 90s, classified within their respective architectural eras, the inherent challenges must be taken into consideration. Gaining a comprehensive understanding of these challenges is essential as we reinvent these historic buildings, ensuring their successful adaptation for contemporary use.


Building Micro-Campuses in Suburban Neighborhoods

Office-to-residential conversions have the potential to attract new businesses to the area, leading to the creation of new jobs and the overall stimulation of economic growth. As more people reside in these districts, the local economy thrives, creating a cycle of prosperity and opportunity.

As we embark on new development projects, it is crucial to recognize that the transformation of older projects does not necessitate complete demolition. Instead, it is imperative to envision the potential of revitalizing suburban office parks. With the shift of people from cities to suburbs following the impact of the COVID-19 pandemic, we witnessed a resurgence in these suburban areas. In response, communities began enhancing their appeal by introducing an array of amenities, such as retail spaces, coffee shops, and local attractions. Harnessing this momentum, we have the opportunity to convert once-dated suburban office parks into dynamic live-work-play environments that foster a sense of community and offer engaging experiences for residents to enjoy.

There is an opportunity to expand on vacant pieces of land and develop them into micro-campuses. Offices are often surrounded by vast parking lots and empty space, architects can capitalize on these vacant areas and turn them into destinations in and of themselves. When we encounter developments situated on expansive parking lots, we are presented with remarkable potential and a unique opportunity to transform these spaces into captivating outdoor amenities or incorporate additional structures, effectively creating micro campuses. These micro campuses leverage their close proximity to transportation hubs and offer community members an easy way to access live-work-play destinations.


Collaboration and Growth

As architects and designers, it is important to have an open dialogue with our peers to better understand conversions and how we can continue this cycle of adaptive reuse.

“Collaborating closely with general contractors and exchanging valuable insights is of utmost importance. While architects possess a profound understanding of the architectural and design aspects of these conversions, it is equally crucial to comprehend the specific requirements and considerations sought by general contractors,” says Tom Arsovski, Regional Practice Leader, Mixed Use, Southeast Director. “Architects should actively engage with experienced contractors operating within these markets. Given the significant interest and relevance of this topic, fostering meaningful conversations and establishing connections among professionals is paramount to staying at the forefront of this dynamic field.”

Office-to-residential conversions breathe new life into communities through increased foot traffic, the creation of mixed-use developments, preservation of historic buildings, economic growth, improved public safety, reduced commute times, and environmental sustainability. While residential conversions have been around long before the current trend, they will only continue to increase as the years go on, ultimately, paving the way for vibrant, inclusive, and sustainable urban environments that attract residents, businesses, and visitors alike.