Up to one in three office buildings in 14 major North American markets could be a candidate for conversion to residential use, according to a study by Avison Young.
The company analyzed 26,000 office buildings, and concluded as many as 8,996 could meet the criteria for conversion in 10 U.S. and four Canadian markets. “We must reimagine how we want to live, work and play. Adaptive reuse is one of the key components of how we do that as a community,” the company stated.
Using proprietary and third-party analytics, the firm identified two “anchoring criteria” for suitable candidates: buildings erected before 1990 and those with floorplates of less than 15,000 square feet.
With tenants increasingly seeking out high quality buildings with many amenities, owners are confronting increasing vacancy in Class B and C buildings, the company noted. “This presents an opportunity for owners of older buildings to rethink their asset strategy and explore options, whether that is to stay as is, renovate/upgrade, innovate (repurpose/adaptive reuse), or redevelop altogether,” it stated.
At the same time, the study says owners need to pay careful attention to the basics beyond age and floor plate. That includes specific building feasibility, costs, location, and surrounding amenities.
But these are not the only obstacles to consider, as the New York Times recently reported as well as GlobeSt.com. In each case, the newspaper pointed out, owners and developers “must solve for local rules that say what counts as a bedroom, for structural columns and elevator shafts that shape where walls go, for construction costs and land prices that affect rent rolls. And they must solve, above all, for access in every unit to fresh air and sunlight.”
For today’s skyscrapers, that’s the rub. “The issue isn’t the tower’s height, but its dark depths,” the New York Times said.
Older buildings constructed before World War II have the operable windows required in housing, unlike modern climate-controlled offices. And in some cases, as current tenants chase more bells and whistles, “the value of these buildings as offices has fallen low enough that in some locations they might now command higher rents as housing,” the newspaper wrote.
If developers can work out these challenges, the effect could be to help restore the vitality of neighborhoods and downtowns after Covid. “A mix of uses provides much-needed energy and vibrancy,” Avison Young commented.