63 Questions
What was the biggest conversation in the new development space in New York City in the first half of 2023?
The feasibility of office-to-residential conversions
What prompted the Biden administration to announce an initiative to incentivize the conversion of empty office buildings into housing?
High number of empty office buildings and low residential inventory
What did WeWork's bankruptcy filing result in?
Exiting 40 locations in New York City alone
What is the focus of the majority of business for the research and advisory division launched in 2020?
Analyzing office-to-residential opportunities in Manhattan and the boroughs
What is considered an essential step in residential pre-development planning?
Walking the building and putting pen to paper
Why are corner properties generally better candidates for conversions?
They have more exterior wall and windows per floor plate dimensions
What is a potential challenge of older office buildings with unique fenestration?
Creating unconventional residential spaces
What is an important consideration when laying out residential apartments in conversions?
Moving the elevator core to achieve the ideal unit mix
Why are column locations an important factor in conversion studies?
They impact the attainability of the most desirable unit mix
What can deep office floor plates potentially create in conversions?
Potentially unusable or less valuable space
What are some details commonly found in older office buildings but not typically budgeted for in new construction?
Detailed windows with intricate jambs, headers, and sills
What is an advantage of conversions with details covetable in new construction?
They save resources and energy
What is the role of tax incentives in conversion projects?
To make these projects more economically viable
What is the potential impact of moving the elevator core in a conversion project?
It can be very costly and cause the project to not be financially viable
What do conversions with traditional architecture provide opportunities for?
Developing designs responsive to historical context
What is the role of foresight and planning in conversion projects?
To ensure immense benefits to the city and neighbors
What is the current situation of office space in Manhattan?
94,000,000ft² of empty office space, an all-time record
What is the proposed solution for the empty office space in downtown areas?
Easier conversion of unused office space to housing
What is a potential challenge in converting office buildings into housing?
Not every office building makes for a great conversion
What are some big cities looking at in relation to building conversions?
Incentives for developers who convert buildings into housing
What is the number one issue in New York according to the text?
Zoning
What is the focus of the U.S. initiative to incentivize the conversion of empty office buildings into housing?
Creating more affordable housing
What is a potential challenge of older office buildings with unique fenestration?
Lack of natural light
What does the ten year tax abatement in Philadelphia primarily aim to achieve?
Promoting property renovation
What is the potential impact of moving the elevator core in a conversion project?
Optimized space utilization
What is the main purpose of the U.S. initiative to incentivize the conversion of empty office buildings into housing?
Addressing housing shortages
What is the role of tax incentives in conversion projects according to the text?
Promoting property renovation
What is the primary impact of the ten year tax abatement in Philadelphia?
Encouraging property renovation
What is the main concern highlighted by critics of certain policies according to the text?
Unnecessary developer handouts
What is the primary reason for the U.S. needing more market rate homes at affordable price points?
Addressing the needs of extremely low-income renters
What is the main focus of the additional supply in expensive major cities according to supporters?
Calming the housing markets
What is the primary concern regarding the scale of the housing problem according to the text?
Insufficient government resources
Which cities are leading the office conversion trend?
Washington, D.C. and Philadelphia
What technique do builders use to convert buildings into apartments?
Remassing
What is the typical household income allowing for rent in Philadelphia?
$1,300
What is a challenge for developers in office conversions?
Physical layout and floor plates
What is the occupancy status crucial for in office conversions?
Conversion
What are the typical U.S. office buildings like in comparison to those suitable for conversion?
Newer and bigger
What is the impact of office vacancies on government finances in New York City?
Roughly $6 billion in taxes
What is the focus of the Post Brothers' portfolio?
Mid-Atlantic buildings
What is the rental range for units at The Atlantic in Philadelphia?
$3,000 to $6,000 a month
Why are older buildings considered better for conversions?
They make better conversions
What is the role of access to light and air in office conversions?
Requiring creative redevelopment
What is the typical rent for single bedrooms at the Poplar in Philadelphia?
$2,000 a month
What is the primary focus of the U.S. initiative to incentivize the conversion of empty office buildings into housing?
Addressing office vacancies and creating more housing options
What is a potential challenge for developers in office conversions?
Adapting to unique fenestration and floor plate layouts
What is the role of foresight and planning in conversion projects?
Anticipating potential structural challenges
What percentage of households report working from home more frequently now than before the pandemic?
35%
By how much did workers' office attendance reduce from pre-pandemic norms?
30%
In which quarter of 2023 did commercial real estate investment volumes fall by 64% year-over-year?
Q2
What is the current office vacancy rate as per the text?
18.2%
What percentage of renters are spending more than 30% of their income on housing?
45%
What is the estimated number of suitable residential units that can be added through commercial-to-residential conversions?
171,470
What is the current rental vacancy rate in the U.S. housing market?
6.3%
What is the estimated shortage of housing units in the U.S. housing market?
3.8 million
What is the potential impact of the COVID-19 pandemic on office space demand?
Decrease in demand for office space
What is the main focus of the Biden-Harris Administration's aim to facilitate commercial-to-residential conversions?
Environmental sustainability
What is the potential impact of converting commercial real estate to housing compared to new construction?
Faster completion and lower costs
What existing federal programs support commercial-to-residential conversions?
Community Development Block Grant and Historic Tax Credit
What is the estimated increase in lending capacity for development projects due to DOT policies?
$35 billion
What is the expected trend for new opportunities of commercial-to-residential conversions?
Increasing trend
What is the primary reason for the long-term shift in office space demand?
Remote work trends
What is the potential impact of commercial-to-residential conversions on climate change?
Reduction in carbon emissions
Study Notes
Office Conversions into Apartments: Trends and Challenges
- Office conversion trend is heating up in a small group of cities, led by Washington, D.C. and Philadelphia
- The Poplar Building in Philadelphia, built 100 years ago as offices and manufacturing space, is one of several conversions conducted by the Post Brothers
- Converting offices into apartments involves complex physical considerations, such as access to light and air, requiring creative redevelopment
- Builders use a technique called remassing, with different levels of intensity, to convert buildings into apartments
- Converted apartments tend to be pricey, addressing only a fraction of the housing need in hot markets like Denver or San Francisco
- In Philadelphia, typical household income allows for $1,300 in rent, while at the Poplar, single bedrooms rent for $2,000 a month, and at The Atlantic, units can rent for $3,000 to $6,000 a month
- The Post Brothers' portfolio includes 12 buildings in the mid-Atlantic with plans for expansion, maintaining high occupancy rates
- Office vacancy rates are historically high, with New York at 12-13%, leading to challenges for investors and affecting government finances
- The occupancy status is crucial for conversion, with older buildings making better conversions, but the typical U.S. office is newer, bigger, and not vacant enough for conversion
- Office vacancies have implications for government finances, with New York City offices generating roughly $6 billion in taxes each year
- New York has previously experimented with office conversions, and there is a need to think bigger about how to build more housing to address the housing need
- Challenges for developers include the physical layout, floor plates, and systems, as well as the need for a clear path to emptying out office tenants before conversion can take place
Commercial-to-Residential Conversions in the U.S. Housing Market
- The U.S. housing market suffers from a shortage of 3.8 million housing units.
- Rental vacancy rates are at a historic low of 6.3%, and 45% of renters are spending more than 30% of their income on housing.
- Conversions of commercial properties to residential units can help combat climate change by reducing carbon emissions.
- Past examples in New York, Los Angeles, and Philadelphia have successfully revitalized areas through commercial-to-residential conversions.
- Converting commercial real estate to housing presents physical and financial complexities.
- Despite the challenges, 15% of commercial district office buildings in major U.S. cities are suitable for residential conversion, potentially adding 171,470 units.
- Conversions can be completed more quickly and at lower costs compared to new construction.
- The COVID-19 pandemic has led to a long-term shift in office space demand, making commercial-to-residential conversions more viable.
- The Biden-Harris Administration aims to facilitate commercial-to-residential conversions through federal programs and new actions.
- Existing federal programs like the Community Development Block Grant and Historic Tax Credit already support commercial-to-residential conversions.
- DOT policies have unlocked $35 billion in lending capacity for development projects, making conversions easier to finance.
- New opportunities for commercial-to-residential conversions are expected to continue arising in the future.
Take the "Office-to-Residential Conversions Feasibility Quiz" to test your knowledge on the potential of converting underutilized office spaces into residential units in New York City. Explore the factors driving this trend, such as office occupancy rates, housing demand, and affordable housing needs.
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