Brooks McDaniel, Senior Vice President Building Repositioning, STO Building Group
As urban landscapes evolve, cities face a dual challenge: high office vacancy rates and critical housing shortages. One innovative solution is transforming underutilized office buildings into residential spaces. To explore this trend, Brooks McDaniel, Senior Vice President of Building Repositioning at STO Building Group, dives into valuable insights into the complexities and opportunities of these conversion projects.
What are the common myths surrounding office-to-residential conversions, and how do the realities differ?
This is one of the most frequently asked questions. A prevalent myth is that these conversions don’t work due to challenges like deep floor plates, plumbing issues, or high costs. However, the reality is that many office buildings in cities like New York are well-suited for conversion. For deep floor plates, the solution lies in designing deeper units, often featuring home offices or interior bedrooms with borrowed light, which some cities allow. Plumbing challenges are resolved by core drilling the slab to relocate pipes as needed. Ultimately, these projects are no more complex than any other construction endeavor.
How do costs compare between constructing new residential buildings and converting existing office spaces?
Cost is a significant factor favoring conversions. New construction typically involves demolition costs of $75 to $100 per square foot and rebuilding expenses of $450 to $550 per square foot, resulting in a total cost of $550 to $650 per square foot. In contrast, office-to-residential conversion prices in New York City range from $275 to $375 per square foot.
What is the timeline difference between office-to-residential conversions and new construction?
The timeline is a significant factor when considering conversions versus new builds. Conversion projects typically take 22 to 24 months to complete, compared to 36 months or more for new residential construction. This time savings not only reduces carrying costs but also accelerates the delivery of much-needed housing. For developers, shorter project timelines translate to quicker returns on investment, making conversions a practical and appealing alternative to groundup construction.
What are some common design challenges in office-to residential conversions and are there solutions?
Design challenges often begin with windows. Buildings must meet legal light and air requirements, which dictate specific depths between windows and lot lines. If existing conditions don’t suffice, we modify floor plates to create the needed space. Operability is another consideration; windows in residential buildings must open, which can necessitate modifying facades of office buildings. Partnering with skilled design teams allows us to address these challenges effectively while ensuring compliance with energy codes.
How are zoning laws in cities like New York and Los Angeles impacting these projects?
Zoning laws play a pivotal role. In New York, Article 1, Chapter 5 of the zoning text facilitates as-of-right conversions of office buildings, offering benefits like reduced rear yard requirements. Similarly, Los Angeles is updating its adaptive reuse ordinance to include buildings as recent as 15 years old, reflecting a nationwide trend toward more flexible zoning.
What roles do government incentives like tax abatements and streamlined approvals play?
Government incentives are crucial for making conversion projects viable. New York City, for instance, offers generous tax abatements that support project financials. Other cities like Los Angeles and San Francisco are following suit, reducing approval timelines from one to two years down to six months and proposing state-level tax abatement plans. These measures significantly reduce carrying costs and expedite project timelines, making conversions more attractive to developers.
How do urban housing shortages and high office vacancy rates intersect? Is repositioning existing buildings a solution to both?
Many cities face the dual challenge of housing shortages and high office vacancies. This convergence creates an opportunity to repurpose underutilized office spaces into much-needed housing. Declining office demand allows these properties to be acquired at a discount, while high residential rents make conversions financially attractive. By repurposing office buildings, cities can address housing demands while reducing the oversupply of office space.
Additionally, converting office buildings into residential spaces supports urban revitalization. These projects can breathe new life into neighborhoods, attracting residents and boosting local economies. By aligning urban planning strategies with market trends, cities can transform challenges into solutions, creating a more balanced and sustainable real estate landscape.